Amendments – Goods Transport Agency Under GST

Goods Transport Agency (GTA)

♦ GTA can exercise option to pay GST under forward charge

• 5% without ITC
• 12% with ITC
• Option to be exercised within a time frame in Annexure V
• Option for FY 2022-23 to be exercised before 16.08.2022
• Invoices for the period 18.07.2022 to 16.08.2022 can be issued before exercising the option provided option exercised on or before 16.08.2022
• Invoice requires a declaration in the format specified in Annexure III

♦ Where GTA does not exercise the forward charge option

• GST at 5% under RCM
• No ITC on goods and services used in supplying the services
• RCM not applicable where the supplier of service has GST registration and has exercised option to pay GST under forward charge; issued invoice and made declaration prescribed in Annexure III on such invoice

♦  Key exemptions withdrawn

• GTA where consideration for transportation in a single carriage does not exceed Rs. 1,500
• GTA where consideration for transportation of all such goods in a single carriage does not exceed Rs. 750

♦ GST at 18% on supporting services in transport through substituted Entry 11 with added explanation to provide that the entry does not include goods transport service involving GTA service which falls under heading 9965

In this article, we would try to understand changes in GST and its impact on Goods Transport Agency. For easy comprehension, the article is presented in the form of FAQ’s so that the trade can dissect the practical scenarios applicable for them and take timely action.

Q1. What is the change in taxability for GTA’s by virtue of recent amendment?

Ans: Pursuant to recommendations by the GST council in its 47^th meeting, Notification No. 03/2022- Central Tax (Rate) dated 13-07-2022 is issued wherein, Now, w.e.f. July 18, 2022 the GTA’s are having the following options of taxability:

Options	Tax rate	Condition
(a) GTA Opting for reverse charge	5%	Tax to be paid by recipient of services under RCM. The credit of input tax charged on goods and services used in supplying the service has not been taken by GTA.
(b) GTA Opting for forward charge	5% or 12%	ITC is eligible, where GTA’s pay tax @ 12%, ITC on goods or services used is not eligible where GTA pay tax @ 5%. No need to pay liability under RCM in both the cases by recipient of services.

Q2. Who are covered within the ambit of ‘Goods Transport Agency’?

Ans: The term ‘Goods transport agency’ (hereinafter referred to as ‘GTA’) is defined under Notification No. 11/2017-Central Tax (Rate) as amended as “any person who provides service in relation to transport of goods by road and issues a consignment note, by whatever name called.”

This interalia means that only the transporters who undertake a road transport are covered within the ambit of ‘Goods Transport Agency. Further, such transporter must issue a consignment note.

In other words, rail, sea or air transportation of goods does not get covered within the ambit of GTA. Also, a goods transport operator who does not issue a consignment note also cannot be termed as a ‘Goods transportation agency’.

Q3. What was the taxability of GTA’s under GST prior to the amendment?

Ans: Originally, the taxability of GTA was covered under reverse charge, wherein the customer who is the recipient of service were liable to pay tax under reverse charge @ 5%.

Further, w.e.f. 22.08.2017, an option was given to the GTA’s to charge GST @ 12% under forward charge to the customers, wherein they were also eligible for input tax credit.

The option once chosen had to be consistently followed and there was no mechanism to shift between the options year on year i.e., the GTA once opted for forward charge could not shift to the reverse charge mechanism.

Q4. How can a GTA exercise the option for paying tax under reverse charge or forward charge?

Ans: The option by GTA to itself pay GST under forward charge on the services supplied by it shall be exercised by making a declaration in Annexure V on or before the 15^th March of the preceding Financial Year. For ex: If a GTA wishes to opt for paying tax under forward charge for FY 23-24, then it needs to submit a declaration on or before March 15, 2023.

Q5. What are the timelines for choosing the option for FY 2022-23?

Ans: The option for the Financial Year 2022-2023 shall be exercised on or before the 16^th August, 2022.

Q6. What if the declaration is not submitted for FY 22-23 prior to Aug 16, 2022?

Ans: If a GTA does not submit a declaration for FY 22-23 before Aug 16, 2022, then it would be deemed that the GTA has opted for taxability under reverse charge. Further, such GTA cannot later opt to pay tax under forward charge for FY 22-23.

Q7. Can a GTA opt for multiple options within the same financial year?

Ans: No, the option once chosen would be valid for a financial year and a GTA cannot shift to a different option in a same financial year i.e., a GTA can either opt for paying taxes under forward charge mechanism (under either rate) or under reverse charge and not both for same financial year.

Q8. What if the GTA is currently already paying taxes under forward charge, whether it also needs to submit the declaration?

Ans: If a GTA is currently paying tax under forward charge and it wishes to continue paying the tax under forward charge, then such GTA also needs to submit the declaration as there is no relaxation mentioned for such GTA’s in the Notification No. 03/2022- Central Tax (Rate) dated 13-07-2022.

Further, by submitting such declaration, the GTA would also be eligible to pay tax under forward charge @ 5% without ITC.

If such declaration is not given, then it would be deemed that the GTA has opted for taxability under reverse charge.

Q9. What if the GTA is currently covered under reverse charge, then whether it needs to submit the declaration?

Ans: If a GTA is currently covered under reverse charge and it wishes to continue paying the tax under reverse charge, then such GTA is not required to submit any declaration. If such declaration is not given, then it would be deemed that the GTA has opted for taxability under reverse charge.

However, if the GTA who is covered under reverse charge chooses to shift to forward charge, then it needs to give the declaration.

Summary position of declaration and liability for FY 2022-23 is as below:

Option presently followed by GTA	Proposed option by GTA	Action to be taken	Remarks
FCM	FCM	File declaration by 16th August	NA
FCM	RCM	Do nothing	Ensure that tax is charged under RCM w.e.f. 16th August. May continue to charge under FCM till 15th Aug
RCM	RCM	Do nothing	NA
RCM	FCM	File declaration by 16th August	Even if charged under RCM earlier, may charge under FCM w.e.f. 18th July 22 provided declaration is filed by 16th August.

Q10. What needs to be given in the declaration?

Ans: As per Notification No. 03/2022- Central Tax (Rate) dated 13-07-2022, the GTA opting to pay tax under forward charge needs to give a declaration to the jurisdictional GST authorities expressing their intent of choosing the option. (The format of the declaration is enclosed as Annexure I below)

Q11. Whether a separate declaration is required to be given for each GST number or whether it needs to be given at entity level?

Ans: The declaration needs to be given for each GST number separately as each GSTIN constitutes a separate distinct person as per the GST law. Further, the declaration form requires a dated acknowledgement of each jurisdictional GST authority. As there are jurisdictional GST authorities for each GSTIN, therefore a separate acknowledgment must be obtained for each of the authorities under whose jurisdiction the registration has been obtained.

Q12. Can a GTA raise invoice under forward charge prior to 16th Aug 2022 for FY 2022-23?

Ans: Yes, the invoice for supply of the service charging GST may be issued during the period from the 18th July, 2022 to 16th August, 2022 before exercising the option for the financial year 2022-2023 provided that the GTA exercises the option to pay GST on its supplies on or before the 16th August, 2022. This option of charging tax under forward charge during interim period would be available irrespective of GTA charging operating under FCM or RCM in the earlier period.

Q13. What if the supply is wrongly assessed under reverse charge, while it is taxable under forward charge or vice-versa?

Ans: Yes, in case a GTA has wrongly assessed a transaction as liable under reverse charge, while the same is taxable under forward charge or vice-versa, then in such case, the GTA can cancel the original invoice and issue a new invoice if the correction is carried out in the same month.

However, if the correction is carried out in any subsequent month, then the same can be corrected by way of issuing a debit note as per section 34 of the CGST Act, 2017.

Q14. As the services supplied @ 5% are not eligible for ITC, whether GTA is required to issue bill of supply for such invoices?

Ans: The restriction is only for the purpose of availment of ITC by GTA. The transaction continues to be taxable @ 5% wherein GTA need to raise tax invoice (not bill of supply) and mention 5% rate of tax and tax amount on the invoice.

Q15. Whether same truck can be used for both 5% & 12% business? If yes, how ITC can be availed?

Ans: There is no restriction in the law for usage of capital goods for either of the businesses. Hence, GTA could use single truck for making supplies of services both @ 5% as well as 12 %.

However, it is pertinent to note that the supplies @ 5% would be deemed as an exempt supply and therefore if a GTA procures a truck and avails input tax credit on the same, then it needs to reverse the proportionate input tax credit based on the usage of the said truck towards turnover of 5% supplies to be computed over 60 months in accordance with rule 43 of the CGST rules, 2017.

(Views expressed in this presentation is personal view of the presenter. This Presentation includes general information about legal issues and development in the law of GST in India. Such materials are for information only. These Informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances.)

ANNEXURES:

Annexure I – Declaration for opting for forward charge:

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: –

1. 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;

2. 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:

(Dated acknowledgment of jurisdictional GST Authority)