In the evolving GST framework, the convergence of e-commerce, transportation services, and consumer transactions has exposed regulatory gaps that challenge traditional tax classifications. As digital platforms increasingly integrate with retail supply chains, the Government of India faces a significant challenges in balancing the retailers, consumers and market competition while simultaneously closing avenues for tax evasion through frameworks like the Goods and Services Tax (GST). One of such recurring dilemma remains around the question of “Whether delivery fees charged to unregistered consumers attract GST when the goods move by road under a consignment note[i] ?” Seeking to understand this uncertainty, Flipkart India Private Limited approached the West Bengal Authority for Advance Ruling (WBAAR) to clarify the GST treatment of its proposed transportation model for delivering goods purchased through e-commerce portals.
The Authority in West Bengal Authority for Advance Ruling, in Order No. 15/WBAAR/2025-26 dated 09 December 2025[ii], examined two major issues: Whether such transportation qualifies as a Goods Transport Agency (GTA) service, and whether GST exemptions apply when the service recipient is an unregistered person. After analysing the proposed model, applicable notifications, and the definition of “recipient” under the CGST Act, the Authority ruled that the service does qualify as a GTA service due to the issuance of consignment notes. Furthermore, it held that when such GTA services are provided to eligible unregistered persons, they are exempt from GST under Entry 21A of Notification No. 12/2017[iii].
I. The “Goods Transport Agency” Test
The primary threshold for determining taxability under this framework is the classification of the service provider. The GST regime maintains a distinct separation between a mere “transporter of goods by road[iv]” and a “Goods Transport Agency” (GTA). The critical differentiator is found in the definitions provided under the Notification No. 12/2017-Central Tax (Rate). Paragraph 2(ze)[v] of the said Notification defines a Goods Transport Agency as follows:
“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”.
Following the interpretation drawn by the applicant, applicant proposed a model where goods are transported exclusively by road using trucks, vans, or two-wheelers. Crucially, the applicant submitted that for every movement of goods, a formal consignment note would be issued. The WBAAR observed that the issuance of a consignment note is the prerequisite for classifying a service provider as a GTA. This document indicates that the transporter has assumed the responsibility for the custody and risk associated with the goods. Consequently, the Authority ruled that the activity does not fall under the general category of road transport but squarely qualifies as a GTA service. This classification is vital because it moves the service into a specific regulatory framework that allows for specific exemptions not available to general courier agencies.
II. The “Recipient” and Payment Liability
Once the service is classified as a GTA service, the analysis of the court shifted to identifying the legal “recipient” of the service to determine tax liability. In e-commerce transactions, confusion often arises regarding whether the recipient is the seller, the platform, or the end consumer. The Authority relied on the Literal rule[1] of interpretation of statutory definition provided in Section 2(93) of the CGST Act, 2017.
Section 2(93) of the CGST Act explicitly defines the recipient of supply of goods or services or both as:
(a) “where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person to whom the service is rendered,
(d) and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;”
In the proposed model, Flipkart clarified that it merely collects the transportation or delivery charges directly from the end customer, either through online payment channels or Cash on Delivery, the end customer remains the recipient of the service under Section 2(93) of the CGST Act.
Applying the Section 2(93) (a) on the flipkart proposed model, the Authority held that since the end customer is the person liable to pay the consideration for the transportation service, the end customer is the “recipient“. This legal determination effectively kept out the e-commerce operator’s potential liability in instances where they might be deemed the supplier under other sections, focusing instead strictly on the flow of consideration for the specific service of transportation.
III. The Exemption Mechanism for Unregistered Persons
Having established the service as a GTA service and the end consumer as the recipient, the final stage of the analysis involves the applicability of exemption notifications. The core of the applicant’s argument rested on Entry 21A of Notification No. 12/2017-Central Tax (Rate)[vi].
While Entry 21 of the Notification exempts GTA services for specific goods such as agricultural produce, milk, salt, and food grains, Entry 21A (as cited in the ruling analysis) provides a broader exemption based on the status of the recipient. The Authority examined this entry, which exempts services provided by a Goods Transport Agency to “unregistered persons”. The exemption serves as a relief mechanism for individuals or entities not registered under the GST Act who utilize road transport services.
The Authority’s reasoning established a direct syllogism:
1. The service is a GTA service because a consignment note is issued.
2. The recipient is the end customer because they are liable for the payment.
3. Consequently, if the end customer is an unregistered person[vii] (an individual consumer), the service falls within the ambit of the exemption entry.
Therefore, the WBAAR ruled that no GST is payable on delivery charges collected from unregistered end customers under this specific model. This interpretation underscores that the exemption is recipient-centric; the same service provided to a registered business entity (B2B) would be taxable, whereas it remains exempt for a B2C transaction.
IV. ANALYSIS
A. The “Composite Supply”: De-bundling the Naturally Bundled
While the Flipkart ruling appears legally sound based on a strict, literal interpretation of the notification entries and statutory definitions, it sits at a crossroad of tension with the broader legislative intent regarding “Composite Supply.” Despite the ruling’s technical logic, many legal experts argue it conflicts with the spirit of ‘Composite Supply.’ Critics suggest that e-commerce operators may be using the GTA classification as a ‘colourable device’ a strategic maneuver to avoid the higher tax rates typically bundled with the principal product.
The crux of the controversy lies in the interaction between the logistics model and Section 2(30) of the CGST Act[viii], which defines a composite supply as:
“a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both… which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply”.
Furthermore, Section 8[ix] dictates the tax liability for such supplies, stating that:
“A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply”.
For example if a consumer purchases a mobile phone (taxable at 18%) and pays for delivery, the delivery service is naturally bundled with the principal supply of the phone. The consumer’s primary intent is to acquire the phone; the delivery is merely ancillary. Under Section 8, the delivery charge should logically attract the same 18% GST rate as the phone as per the principle of composite supply.
However, E-commerce platforms structurally separating the logistics arm by splitting invoice into product cost and transport cost respectively, issuing a separate consignment note, and treating the transportation as a distinct service provided to the consumer, effectively “de-bundling” the service. This legal manoeuvring allows them to claim the GTA exemption available for unregistered persons under Entry 21A, thereby bypassing the tax liability that would otherwise attach to the principal supply.
B. The “Colourable Practice” Allegation and Legislative Intent
Recently this tension has ignited further following recent representations to the Finance Ministry, reportedly through a letter by Senior Advocates, accusing major e-commerce players of persisting with non-compliant tax practices. The allegations suggest that despite legislative attempts to plug loopholes, companies continue to split invoices into “product cost” and “transport charges” to minimize tax liability.
This practice has been described by critics as a “colourable Practice[x]” to erode the GST base. The argument posits that the exemption for GTAs serving unregistered persons was originally intended to protect small goods transport operators and the unorganized trucking sector, not tech-driven logistics models of multinational e-commerce giants,.
C. The “By or Through” Amendment
The controversy is further compounded by recent amendments notified by the Government. To curb potential misuse, the Finance Ministry clarified that transport services provided “by or through” e-commerce operators would no longer qualify for certain exemptions, to re-affirm the original legislative intent of exemption under Entry 21A to protect small goods transport operators. This amendment draws a bright line ensuring that large platforms comply under the forward charge mechanism rather than claiming exemptions meant for smaller players.
However, after this amendments entities have opted for GST payment under the forward charge mechanism, but continued to issue consignment notes declaring payment of tax while simultaneously availing exemptions for unregistered recipients a practice described by tax practitioners as “having their cake and eating it too[xi]”.
Conclusion
The ruling in In re Flipkart India Private Limited provides a technically precise interpretation of the current GST statutes: if an entity issues a consignment note becoming a GTA and provides services to an unregistered person, the recipient paying the consideration, the service is exempt from GST. This confirms that the presence of a consignment note and the identification of the payer are the decisive factors in tax liability.
However, this literal interpretation exposes a significant Friction point between the text of the law and the Revenue Department’s objective to tax composite supplies comprehensively. With allegations of non-compliance and “revenue loss to the exchequer”, businesses must stay alerted on the developments. While “No GST on Delivery Charges” is currently a legally defensible position as per the recent rulings for unregistered customers under this specific model, it remains a position fraught with regulatory risk, likely to attract further legislative tightening to ensure that the spirit of the legislative intent persists.
Referance
[i] See Central Goods and Services Tax Act, 2017, § 2(93).
[ii] In re Flipkart India Pvt. Ltd., Case No. 15/WBAAR/2025-26 (W.B.A.A.R. Dec. 9, 2025).
[iii] Notification No. 12/2017-Central Tax (Rate), Entry 21A (June 28, 2017).
[iv] Id. at ¶ 2(ze).
[v] Notification No. 12/2017-Central Tax (Rate), ¶ 2(ze) (June 28, 2017).
[vi] Notification No. 12/2017-Central Tax (Rate), Entry 21A (June 28, 2017).
[vii] Central Goods and Services Tax Act, 2017, § 2(94) (defining “registered person”).
[viii] Central Goods and Services Tax Act, 2017, § 2(30).
[ix] Central Goods and Services Tax Act, 2017, § 8.
[x] See McDowell & Co. Ltd. v. CTO, (1985) 3 SCC 230 (discussing “colourable devices” in tax avoidance).
[xi] Tanisha Kohli, Flipkart Faces Allegations of Continued GST Non-Compliance Despite Law Amendment on Transport Services, CNBC-TV18 (July 11, 2024). https://www.cnbctv18.com/business/companies/flipkart-faces-allegations-of-continued-gst-non-compliance-despite-law-amendment-on-transport-services-19720470.htm.
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