GST implications on transportation of goods by road and GTA

Roads are an important mode of transport in India. India has a network of over 6,215,797 kilometres of roads as of 31 March 2020. This is the second-largest road network in the world. India’s road network carries over 71 percent of its freight traffic – thereby making it the largest means of transport in India. 

Thus there are various statutory provisions under GST laws on transportation of goods by road. Firstly, for any movement of goods whose value exceeds Rs. 50,000, an e-waybill must be generated. However, we are not dealing with e-waybills in this article. Secondly, tax is payable on transportation services on either forward charge basis by the transporters or on reverse charge basis by the recipients.

Taxation on services provided by Goods Transport Agency (GTA) and non-GTA

Services by way of transportation of goods are exempt by way on entry 18 in the table of Notification 12/2017 – Central Tax (Rate) dated 28th June, 2017, other than services by Goods Transportation Agency (GTA) or courier services. Therefore, transportation services provided by all transporters who are not GTA are exempt from levy of GST. 

GTA has been defined as “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” in Notification No. 11/2017 – Central Tax (Rate) dated 28th June, 2017. 

Thus, it can be seen that issuance of a consignment note is the sine-qua-non for a supplier of service to be considered as a Goods Transport Agency. If such a consignment note is not issued by the transporter, the service provider will not come within the ambit of the 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 it’s safe delivery to the consignee.

It is only the services of such GTA, who assume agency functions, that have been brought into the GST net. Individual truck/tempo operators who do not issue any consignment note are not covered within the meaning of the term GTA. As a corollary, the services provided by such individual transporters who do not issue a consignment note will be covered by the entry at s.no.18 of Notification 12/2017 – Central Tax (Rate) dated 28th June, 2017, which is exempt from GST.

To summarize, transportation services provided by GTA shall be taxable and transportation services provided by non-GTA shall be non-taxable.

Nature of service	Taxability
Transportation services provided by GTA	Taxable service
Transportation services provided by non – GTA	Non – taxable service

Rate of tax and mechanism

Forward Charge

Rate of tax on transportation services by GTA is intertwined with the mechanism in which tax will be charged. Firstly, the GTA shall exercise an option to pay tax either as forward charge or under reverse charge mechanism. Where the GTA opts to pay tax on forward charge mechanism, he shall have following options – 

1. Tax @ 12% with ITC – In this option, the GTA shall charge 12% GST on its invoices and avail ITC on eligible inward supplies received by it.

2. Tax @ 5% without ITC – In this option, the GTA shall charge 5% GST on its invoices and shall not avail any ITC on its inward supplies.

The GTA who opts to pay tax on forward charge basis may exercise this option by making a declaration in Annexure V on or before 15th March of the preceding financial year, i.e for FY 2023-24, the GTA must make the declaration by 15th March, 2024. For FY 2022-23, the said declaration can be made by 16th August, 2022. 

“Annexure V

FORM

Form for exercising the option by a Goods Transport Agency (GTA) for payment of GST on the GTA services supplied by him under forward charge before the commencement of any financial year to be submitted before the jurisdictional GST Authority.

Reference No.-

Date: –

• I/We______________ (name of Person), authorised representative of M/s……………………. have taken registration/have applied for registration and do hereby undertake to pay GST on the GTA services in relation to transportation of goods supplied by us during the financial year……………under forward charge in accordance with section 9(1) of the CGST Act, 2017 and to comply with all the provisions of the CGST Act, 2017 as they apply to a person liable for paying the tax in relation to supply of any goods or services or both;

• I understand that this option once exercised shall not be allowed to be changed within a period of one year from the date of exercising the option and will remain valid till the end of the financial year for which it is exercised.

Legal Name: –

GSTIN: –

PAN No.

Signature of Authorised representative:

Name of Authorised Signatory:

Full Address of GTA:”

Further, the GTA shall also make the following declaration on all its invoices – 

“

Declaration

I/we have taken registration under the CGST Act, 2017 and have exercised the option to pay tax on services of GTA in relation to transport of goods supplied by us during the Financial Year _________ under forward charge.”

Reverse Charge

Where GTA does not opt for forward charge taxation, in such cases tax shall be payable by the recipient on transportation services under reverse charge mechanism. The recipient shall pay tax @ 5% and avail input tax credit on such payment of tax. The transporter shall not be eligible to obtain any ITC on its inward supplies. 

Summary of analysis:

Nature of transportation services	Taxability	Remarks
Services by non-GTA	Exempt
Services by GTA opting to pay tax on forward charge basis	Taxable 5% – without ITC           or 12% – with ITC	Option to be exercised every year through Declaration in Annexure V within 15th March of preceding year. All invoices must contain the declaration.
Services by GTA opting not to pay tax on forward charge basis	Taxable 5% – without ITC	The recipient of services shall pay tax and avail ITC of the tax paid.

Further, vide Notification No. 04/2022, the Board has withdrawn exemption from transportation services on following – 

1. agricultural produce;

2. goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees;

3. goods, where consideration charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred and fifty;

4. milk, salt and food grain including flour, pulses and rice;

5. organic manure;

6. newspaper or magazines registered with the Registrar of Newspapers;

7. relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or 

8. defence or military equipments. 

Thus, tax shall be leviable on all taxable transportation services provided by the GTA irrespective of any limit in value of supplies.

For any clarification / details, you may write to us at info@djas.in.