The Goods Transport Agency (GTA) sector has witnessed significant changes in its taxation framework, with new provisions allowing the option for forward and reverse charges. These amendments, introduced through Notification 03/2022– Central Tax (Rate) dated 13.07.2022, impact the GST liability for both GTA service suppliers and their clients. This article will dissect these changes, outlining their implications for GST and the conditions that must be met by suppliers (GTA) and recipients.
|
Instance |
GST Rate | FC / RCM | Conditions for Supplier (i.e. for GTA) | Condition For Recipient (i.e. for company) |
| (a) GTA Does Not Exercise the option to itself pay GST on the Service Supplied by it | 5% | RCM | GTA Shall Not Take ITC to charge on Goods And Services used in Supplying the GTA Services | 1) Recipient of GTA Services (Registered Factory, Society, Co-Operative Society, Any Person Registered under GST, Body Corporate, Partner Ship Firm, Any Casual Taxable Person) Must Check Whether Declaration As Per Annexure III is Mentioned on invoices i.e GTA Will Pay GST under Forward Charge. if Such Declaration is not Found on the invoices, Pay GST @5% under RCM.
2) Recipient Can Take ITC of GST Paid under RCM if Eligible to Him. |
| (b) GTA Exercises the option to itself pay GST on Services Supplied by it. | 5% | Forward Charge | 1. GTA is Registered under GST
2. GTA to Exercise option to pay GST by it under Forward Charge by Submitting Declaration in the format Annexure-V on or Before 15th March of the Preceding Financial Year 3. GTA to Issue A Tax Invoice to the Recipient Charging GST and Make a declaration as Prescribed in Annexure III on Such Invoices. 4. GTA Shall Not Take ITC Charged on Goods and Services used in Supplying the GTA Services |
Recipient Can Take ITC of GST Paid By GTA, if Eligible to Him. No GST under RCM to be paid as GTA has given declaration on the invoice as prescribed in Annexure III. |
| (C) GTA Exercises the option to itself pay GST on Services Supplied by it. | 12% | Forward Charge | 1. GTA is Registered under GST
2.GTA to exercise option to pay GST by it under Forward Charge by Submitting Declaration in the format Annexure-V on or Before 15th March of the Preceding Financial Year 3. GTA to Issue a Tax Invoice to the Recipient Charging GST and make a declaration as prescribed in Annexure III on such invoices. 4. GTA shall take ITC charged on goods and services used in supplying the GTA services |
Recipient Can Take ITC of GST Paid By GTA, if Eligible to Him. No GST under RCM to be paid as GTA has given declaration on the invoice as prescribed in Annexure III. |
Note:-
1. The option by GTA to itself pay GST i.e Forward Charge on the services supplied by it during a Financial Year shall be exercised by making a declaration in Annexure V on or before the 15th March of the preceding Financial Year.
2. If the service provider has exercised the option to pay tax under Forward Charge then they should also mention in the invoice a declaration as per Annexure-III
3. The GST portal should display the option exercise by the service provider
4. Withdrawal of exemption related to the supply of service by the GTA for the amount of Rs.750/- or Rs.1500/- as the case may be. Now the service of GTA is taxable from Rs.1 w.e.f 18th July, 2022.
Declaration on Invoice
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.”
Can GTA opt to pay Tax under both – forward charge and reverse charge?
GTA service providers must choose one of these mechanisms for a particular financial year and adhere to it consistently throughout that year. This choice is made by submitting a declaration in the prescribed format (Annexure V) on or before the 15th of March of the preceding financial year. Once the choice is made, it cannot be changed until the start of the next financial year.
GTA opting to pay tax under FCM either 5% or 12%, shall be liable to pay tax said rates throughout under FCM on all services of GTA supplied by it – notification 11/2017 – central tax (rate) dated 28.06.2017 as amended by notification 20/2017 central tax (rate) dated 22.08.2017 and notification 3/2022 central tax (rate) dated 13.07.2022 w.e.f. 18.07.2022.
In summary, GTA service providers have the flexibility to select either forward charge or reverse charge for a given financial year, but they cannot switch between the two during the same year and it is not discretionary for the GTA to opt for both scheme of taxes simultaneously.
Whether Consignment note is required for covering under GTA?
There are some important judgements under GTA. I have noted some judgements / advance rulings for your reference.
- K M Trans Logistics Pvt. Ltd – Order No. RAJ/AAAR/5/2019-20 dated 20.11.2029: This ruling appears to affirm that simply not issuing a consignment note does not exempt a transportation service from GST liability. In other words, not issuing a consignment note does not allow one to avoid GST on GTA services.
- M/s Liberty Translines – AAAR Maharashtra 2020 (41) GSTL 657: This ruling emphasizes the importance of issuing a consignment note. It suggests that a subcontractor appointed for the transportation of goods must meet the essential conditions, which include the issuance of a consignment note, to qualify as a GTA.
My take:
Apparently, determination of status quo of service provider as GTA, based on issuance of consignment note has been contentious issue since pre-GST era, which continues even in GST regime, The main reason of dispute is because of the exemption granted to the services of transportation of goods by road. Bare perusal of definition of GTA would imply that if a transporter does not issue the consignment note, the service provider will not come within the ambit of GTA. But the stated provision must not be interpreted in the sense so as to take the benefit of exemption under the grab of non-issuance of consignment note.
When GTA Services Are Not Liable to Reverse Charge:
GTA services are not liable to reverse charge under the following circumstances:
- When the service is supplied to non-specified persons or unregistered recipients.
- When the GTA opts to pay tax under the forward charge mechanism.
- When the GTA service is supplied to a department or establishment of Central or State government, Union Territory, Local Authority, or government agency. This applies if the entity has registered under GST solely for the purpose of deducting TDS under Section 51 of the CGST Act.
Conclusion:
The recent changes in GTA taxation introduce flexibility for service providers in choosing between forward and reverse charge mechanisms. These changes have implications for both GST service suppliers (GTAs) and their clients. Understanding the options and conditions is crucial to ensuring compliance and optimizing Input Tax Credit. GTA clients must carefully check invoices for the prescribed Annexure III declaration to determine the applicable
Author Bio
Can GTA choose either 5% (non Input) and 12% (with Input) under forward charge.
Can u provide the relevant notification as i was thinking that 0nly 12% is to be levied under FCM.
it’s will be helpful for me
Thanx