Goods transport Agency (GTA) is undeniably one of the most unorganised sectors. Road transport business operates in a number of ways including goods transport agency, wayside transporters, courier agencies and so on. Therefore, it is pertinent to test whether they would fall within the ambit of GTA. Consequently, the taxation of GTA has been a contentious issue in the erstwhile Service tax regime as well as in the GST regime. This article analyses the meaning and scope of GTA drawing inference from various judicial pronouncements.
Transportation of Goods by Road
In terms of Notification no. 12/2017-Central Tax (Rate) dated 28.06.2017 (Sr.No.18), the following services are exempt from GST
Services by way of transportation of goods (Heading 9965):
- by road except the services of:
- a goods transportation agency;
- a courier agency;
- by inland waterways.
Thus, it is to be seen that mere transportation of goods by road other than the services rendered by a goods transportation agency, is exempt from GST. Therefore it is pertinent to understand the meaning and scope of GTA.
Meaning and scope of GTA
GTA has been defined in clause (ze) of notification no.12/2017-Central Tax (rate) dated 28/06/2017 and it is same as erstwhile section 65B(26) of Finance Act, 1994 which reads as -
(ze) “Goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called;
Therefore, in the GST regime also, issuance of Consignment Note is an integral and mandatory requirement for any road transporter to be brought within the ambit of GTA. If such a consignment note is not issued by the transporter, the service provider will not come within the ambit of goods transport agency. If a consignment note is issued, it indicates that the lien on the goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till its safe delivery to the consignee.
Consignment Note has neither been defined in the Act nor in the notification no.12/2017-Central Tax (Rate). Guidance can be taken from the meaning ascribed to the term under the Explanation to Rule 4B of Service Tax Rules, 1994. In terms of the said rule, consignment note means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains:
- the name of the consignor
- the name of the consignee
- registration number of the goods carriage in which the goods are transported
- details of the goods transported
- details of the place of origin and destination
- person liable for paying service tax whether consignor, consignee or the goods transport agency.
Therefore a document issued by the transporter has to be examined to see if it falls within the ambit of consignment note. Individual truck/tempo operators who do not issue consignment note shall not covered within the meaning of the term GTA and as a corollary, the services provided by such individual transporters will be exempt as it is covered by the entry at S.No.18 of notification no.12/2017-Central Tax (Rate).
Important judicial pronouncements
1. Bharathi Soap Works Vs Commissioner of Cus & C.Ex, Guntur 2007 (9) TMI 55 - CESTAT, BANGALORE
CESTAT held that issue of consignment note is mandatory under Rule 4B. It is responsibility of the good recipient to insist on the issue of the consignment note and receive the good in proper form. Levy of service tax can't be challenged on the ground of transporters being illiterate or there is an administrative difficulty. A similar view was taken by CESTAT Banglore in the case of Coromandel Agro Products & Oils Ltd. Vs Comm. of C. Ex., Guntur 2014 (6) TMI 657 - CESTAT Bangalore. However, the above decisions have analyzed the issue based on position of law at that time and failed to consider whether the services rendered by individual transporters transporting goods who do not issue a consignment note are liable to tax has not been answered. However in Lakshminarayana Mining Co vs comm. Of ST, Bangalore 2009 (9) TMI 71 CESTAT Bangalore and CCE & C, Guntur Vs Kanaka Durga Agro Oil Products Pvt Ltd & Anr 2009 (3) TMI 130- CESTAT, Bangalore this issue was considered by CESTAT Bangalore and held that the legislature did not intend to levy tax on individual truck owner or truck operators which was clear from the budget speech of FM while introducing Finance Act, 2004
2. Dinshaws dairy foods Vs Commissioner of Central Excise, Nagpur 2018 (4) TMI 912 - CESTAT Mumbai
CESTAT Mumbai held that where the charges are fixed not on the basis of destination or quantity but solely on the Kms the vehicle has run in a month, it cannot be held to be a GTA. The issue is squarely covered by the decision in the case of South Eastern Coal Fields Ltd. Versus C.C.E., Raipur [2016 (8) TMI 677 - CESTAT NEW DELHI], where it was held that in absence of consignment note, services cannot be considered as GTA Service.
3. M/s. Nandganj Sihori Sugar Co. Vs CCE. Lucknow 2014 (5) TMI 138 - CESTAT New Delhi
Held the fortnightly bills cannot be treated as consignment notes, as a consignment note issued by GTA represent its liability to transport the consignment handed over to it to the destination and deliver the same to the consignee and merely a bill issued for transportation of goods cannot be treated as Consignment Note.
As such it would be simple transportation and not the service of GTA which involves not only undertaking the transportation of the goods handed over to it but also undertaking delivery of the goods to the consignee and also temporary storage of the goods till delivery.
4. M/s Carris Pipes and Tubes Pvt Ltd Vs CCE Coimbatore III Division 2018 (7) TMI 24- CESTAT Chennai
CESTAT Chennai held that on perusal of the documents, it was found that that it does not contain any detail with respect to the goods consigned. The vouchers were nothing but documents for monitoring the payment of freight charges to the transporter and can, in no way, be construed as a consignment note. It does not, therefore, evidence the receipt of goods by the consignee, but merely the details of the vehicle, trip and the freight charges paid.
5. CCE & ST Raigad Vs JWC Logistics Pvt Ltd 2018 (5) TMI 1131 - CESTAT Mumbai
Held: An invoice which contains all essential ingredients as laid down in rule 4B is no substitute for a consignment note. An invoice creates a liability of debt on the part of recipient of service. A consignment note, on the other hand, carries with it a certain legal burden, the issuing of a consignment note is a contractual undertaking made to the entity that handed over the goods to the agency of responsibility for safe delivery at the stipulated destination, A consignment note also creates binding responsibility for each consignment. Issue of monthly invoice does not, ipso facto, creates such liability and hence cannot be substituted for a consignment note.
6. M/s Western Coal Fields Ltd Vs CCE, Nagpur 2017 (5) TMI 398 - CESTAT NEW DELHI
Held: Truck authorization slip issued by recipient of supply, even though contain all particulars mentioned in rule 4B, cannot be construed as consignment note for the purpose of definition of Goods Transport Authority. Reference was made to Birla Ready-mix - 2013 (30) STR 99 (Tri-Del.) it was held that the provisions of the Act has to prevail and the definition at Section 65(50b) has to be understood independent of Rule 4B of the Service Tax Rules, 1994 to decide whether the person concerned is a goods transport agency.
While the decision of Bharathi soap works and Coromandel Agro Products & oils Ltd mandates issue of consignment note in compliance with rule 4B and liability is not absolved on failure to issue such consignment note. However, in the absence of an express provision pari materia with rule 4B of Service tax rules in the GST law, the extent to which revenue can mandate the compliance of issue of consignment note is a question. From the judgments in Lakshminarayana Mining Co & Kanaka Durga Agro Oil Products Pvt Ltd, it is clear that the legislative intent is not to tax transport owner and operators as made clear by FM in Budget speech. Thus there is clearly a distinction between a goods transport operator and goods transport agency. This position of law has not changed even in the GST regime.
There are a plethora of cases in service tax wherein it has been held that where admittedly no consignment notes have been issued, the said transporter cannot be called Goods Transport Agency. the provision laid down in clause (ze) of notification 12/2017 is also in consonance with these ruling. Hence where no consignment note has been issued, the transporter cannot be called a GTA in GST regime also also hence exempt as per S.No 18 of notification 12/2017.
On a perusal of consignment note, a mere invoice or a slip/voucher cannot be construed as consignment note. This ratio has been laid down in case of M/s. Nandganj Sihori Sugar Co. and M/s Carris Pipes and Tubes Pvt Ltd cited above. To go further, even an invoice which contains all the particulars laid down in rule 4B cannot substitute a consignment note. In the JWC Logistics Pvt. Ltd., the CESTAT has elucidated the difference between an invoice and a consignment note.
Finally, the consignment note has to be issued by the transporter and not the consignor or the consignee. This ratio has been laid down by CESTAT in Western coal fields Ltd case.
Combined understanding of the above cases will help us to determine whether a transportation service can be classified as GTA or not.