Transport business

This query is : Resolved

RAMAKRISHNA (Querist)
Follow

27 September 2020 my friend has transport agency , he registered in gst , he has no own vehicles but he is hiring vehicles for transportation and getting commission on each trip , He is raising transport bill on total amount to customer on rcm basis , he is filling gstr-1 and gstr -3b , he has done approx 50 lakhs worth bills raised in fy 19-20 As per gst turn over is 50 Lakhs but he has got commission on each trip minimum 200/- . How can he show the turn over in income tax , as per gst turnover 50 lakhs but he has arrived income nearly 2 lakhs( commission) on total year because he has hired the vehicles from others.
Please give your valuable suggestion on , how can he show the income as per gst turnover or commission basis , customers transferred the total bill amount in his bank account sir .

CA Kushwanth AVSR

CA Kushwanth AVSR (Expert)
Follow

29 September 2020 Is he raising the bill on his own name or on the name of the original owner of the vehicle.?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

02 August 2025 Great question! Here's how your friend should approach this from **Income Tax** and **GST** perspectives:

---

### 1. **GST Perspective:**

* Since your friend is a transport agency **without owning vehicles**, and only **earning commission on hired vehicles**, he is essentially providing **service of arranging transport**.
* He **raises GST invoices on the total amount charged to the customer**, but under **Reverse Charge Mechanism (RCM)**.
* The **GST turnover** is **total amount billed to customers** (around ₹50 lakhs).
* He **discharges GST liability on commission received or the entire value under RCM**, depending on whether he is registered as an agent or principal (usually commission).

---

### 2. **Income Tax Perspective:**

* For **Income Tax**, your friend should declare income on a **net basis**, i.e., the **commission earned**.
* The **₹50 lakhs turnover figure is the gross billing amount (total freight)** — but since vehicles are hired, he is **not earning that full amount**; he only **earns commission (say ₹2 lakhs)**.
* Therefore, **income should be declared as commission income** (₹2 lakhs) and the **expenses** (payments to vehicle owners) should also be recorded.
* His **gross receipts** for Income Tax will be commission, not the total freight amount.

---

### 3. **Bank Statement vs Income:**

* Even though customers transfer the entire amount (₹50 lakhs) to his account, for **accounting and tax**, he should treat the ₹50 lakhs as **“passing through” money**, like agency money collected on behalf of principals (vehicle owners).
* Only the **commission amount is income** for him.

---

### **Summary:**

| Aspect | GST | Income Tax |
| ------------- | ---------------------------------- | -------------------------------------------------- |
| Turnover | ₹50 lakhs (gross freight amount) | ₹2 lakhs (commission income) |
| Taxable Value | Full value or commission (depends) | Commission only |
| Bank Receipts | ₹50 lakhs (full collection) | Treated as agency money, only commission is income |

---

### Suggestion:

* Your friend should keep **proper books of account** to clearly show commission income and payments made to vehicle owners.
* File **GST returns with gross turnover (₹50 lakhs)** and pay GST on commission or as per applicable rules.
* File **Income Tax return showing commission income**.

---

If you want, I can help draft a sample accounting entry or explain GST invoicing under RCM for such cases. Would that help?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now