Good Transport by Road and GST Rate under GST Law

The service by way of transportation of goods by road except the services of

i) A Goods Transportation Agency

ii) A Courier Agency

are exempt from GST. [Exemption Notification No. 12/2017-CT(Rate) (under Sr. No. 18 heading 9965) and No. 9/2017-IT (Rate) both dated 28.06.2017, effective from 10.07.2017]. Thus, all transport of goods by road is exempt except in case of the Goods Transport Agency (GTA) and Courier.

Under GST laws, the GTA is defined in clause (ze) in para 2 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 i.e. ‘Goods Transport Agency’ means any person who provides service in relation to transport of goods by road and issue consignment note, by whatever name called.

As per clause (u) in para 2 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017“Courier Agency” means any person engaged in the door-to-door transportation of time-sensitive documents, goods or articles utilising the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles.

As per the definition of GTA, the issuance of a consignment note is considered essential for a supplier of service to be recognized as a GTA. In case, the service provider did not issue such a consignment note, the transporter will not fall under the guidelines of the goods transport agency. Further, the absence of a consignment note for any goods hints the transporter has possession of goods and is responsible until the goods are safely delivered to the consignee.

Consignment Note is neither mentioned in the GST Law nor in the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. However, we can go through the meaning of the consignment note ascribed to the term under the Explanation to Rule 4B of Service Tax Rules, 1994. It defines a Consignment Note as a document provided by a GTA against the receipt of goods for the transport of goods by roadways in a goods carriage. The document contains the details like serial number, name of the consigner and consignee, registration number of the carriage of the goods in which the goods are transported, details of goods being transported, details of the place of origin and destination, and the person who will be liable for the service tax payable from the consignor, consignee or the GTA.

In Nandganj Sihori Sugar Co. vs. CCE (2014), it was held that consignment note issued by GTA represents its liability to-

(a) Transport consignment handed over to it to destination

(b) Undertake delivery of same to consignee and

(c) Temporarily store till delivery.

Further, mere bill issued for transportation of goods cannot be treated a consignment note.

It is also pertinent to mention that service provided by person who does not issue consignment note is not taxable [in earlier service tax law]. If a person/driver of goods carriage is self-employed either by taking vehicle on rent from other or as owner of one or two vehicles, he does not issue any consignment note. As he has direct contract with consignor/consignee, therefore, he himself receives freight from consignor/consignee. In this situation, he would not be liable to service tax. Only GTA which issues a consignment note is liable to service tax. Therefore, GST would not leviable in case where GTA does not issue a consignment note.

GST Rate for Goods Transport by Road.

GST rate for Goods Transport by Road has been provided in Sr. No. 9 & 11 [under heading 9965(Goods Transport Services) & 9967 (supporting services in transport)] of GST Tax Rate Notification No. 11/2017-CT (Rate) and 8/2017- IT(Rate) both dated 28.06.2017, effective from 01.07.2017. GST Rate in case of services of Goods Transport Agency (‘GTA’) in relation to transportation of goods (including used household goods for personal use) is 5% (CGST 2.5% and SGST 2.5%) or IGST 5%. Provided that credit of input tax charged on goods and services used in supplying the service has not been taken by GTA. It means ITC of input services or goods is not available to GTA.

Explanation No. (iv) under Notification No. 11/2017-CT (Rate) dated 28.06.2017– Wherever a rate has been prescribed in this notification subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been taken, it shall mean that,-

(a) credit of input tax charged on goods or services used exclusively in supplying such service has not been taken; and

(b) credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for input tax credits, is reversed as if supply of such service is an exempt supply and attracts provisions of sub-section (2) of section 17 of the Central Goods and Services Tax Act, 2017 and the rules made thereunder

GTA Service under Reverse Charge Mechanism (RCM).

It is submitted that forward charge is provided under section 9(1) of the CGST Act. But, under section 9(3) of the CGST Act, the Central Government has power to specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charges basis by the recipient of such goods or services or both and all the provisions of GST Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

It is to be noted that the Central Government has issued a Notification No. 13/2017-CT(Rates) and 10/2017 -IT(Rates) both dated 28.06.2017, by which the service recipient is liable pat tax in most of the cases. By the Sr. No. 1 of the said notification, the responsibility of paying GST for the supply of services by GTA is transferred to the recipient u/s 9(3) in regards to transportation of goods by road, if the recipient (placed in the taxable territory) falls in the following category:

(a) any factory registered under or governed by the Factories Act, 1948(63 of 1948);

(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or

(c) any co-operative society established by or under any law; or

(d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or

(e) anybody corporate established, by or under any law; or

(f) any partnership firm whether registered or not under any law including association of persons; or

(g) any casual taxable person;

Thus, in the above categories, GST shall be paid under reverse charge basis and not under forward charge. Almost all categories of recipient have been covered under reverse charge mechanism. It is to be noted that this is mandatory and GTA has no option to choose forward charge or reverse charge. But for category which is not covered under this notification, GTA shall paid the GST. For example, where GTA service is provided to unregistered person, GST in relation to transportation of goods (including used household goods for personal use) shall be paid by GTA @ 5% (CGST 2.5% and SGST 2.5%) or IGST 5%. But ITC of input services or goods is not available to GTA.

It is further noted that the person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification.

Please note that the condition of non-availment of ITC is applicable where GTA himself is liable to pay tax as mentioned above and not where the recipient is liable to pay GST under reverse charge. Where the recipient pays GST @ 5% (CGST 2.5% and SGST 2.5%) or IGST 5% on reverse charge basis, he can avail its ITC.

Option to pay GST @ 12% under Forward Charge was provided to GTA w.e.f. 22.08.2017.

It has been noted above that GTA was not having any option to pay GST under forward charge except only in case where recipient does not fall in the category covered under the Notification No. 13/2017-CT(Rates) and 10/2017 -IT(Rates) both dated 28.06.2017.

But now i.e. w.e.f. 22.08.2017, an option has been provided to GTA to choose the option whether GTA wants to pay GST under forward charge or reverse charge. It is to be noted that a Notification No. 20/2017 -CT (Rate) dated 22.08.2017 was issued to amend the original Notification No. 11/2017-CT (Rate) dated 28.06.2017, to provide an option to pay GST @ 12% (CGST 6% Plus SGST 6%) under forward charge. In this case, the GTA can avail ITC. Since the GTA himself will be paying tax, the recipient is not liable to pay GST under reverse charge.

But as it is mentioned above that pursuant to the Notification No. 13/2017-CT(Rates) and 10/2017 -IT(Rates) both dated 28.06.2017, reverse charge is mandatory for the category which is covered under this notification. The GTA has no option to choose forward charge for the category which is covered under this notification.

Therefore, to stream line the provision of [i.e. option to pay GST under forward charge] Notification No. 20/2017 -CT (Rate) dated 22.08.2017 , it was necessary to amend the original Notification No. 13/2017-CT(Rates). So, Notification No. 22/2017-Central Tax (Rate) dated 22.08.2017 was issued to amend and correct the original Notification No. 13/2017-CT(Rates) (Sr.No.1) to stream line the amendment made by Notification No. 20/2017 -CT (Rate) dated 22.08.2017  for providing an option to pay GST @ 12% (CGST 6% Plus SGST 6%) under forward charge. By Notification No. 22/2017-Central Tax (Rate) dated 22.08.2017, the words and figure “who has not paid central tax at the rate of 6%” was inserted. It means by the said amendment, both notifications are not contradicted with each other.

Exemption to service provided by GTA to unregistered person w.e.f. 13.10.2017. 

Later on, GTA services supplied to unregistered person by GTA has been exempted w.e.f. 13.10.2017. [As per Point No-c of Notification No-32/2017(CGST Rate), dated 13.10.17 (Serial No-21A under Heading 9965)]. In nutshell, in case where service is provided by GTA to factory, society, company, partnership firm or registered person, the recipient is liable to pay tax under reverse charge. But, where GTA provides services to unregistered person, it is exempt from GST.

Further, the provision of reverse charge in case of registered person under Notification No. 13/2017-CT(Rates) is not applicable where Government Department, Local Authority or Government Agency is registered under GST only for purposes of TDS under Section 51 of CGST Act [Proviso to Sr. No. 1 of Notification No. 13/2017-CT(Rates) and 10/2017 -IT(Rates) both dated 28.06.2017 inserted w.e.f. 01.01.2019]. In other words, GTA is not liable to pay GST under forward charge for services supplied to Government Department, Local Authority or Government Agency. They will be treated as unregistered person for purpose of exemption to GTA services, even if they are registered under GST only for purpose of TDS under GST. If the Government Department, Local Authority or Government Agency is registered under GST for purpose other than TDS, they will be liable to pay GST under reverse charge if they receive GTA service.

Thus, after 13-10-2017, the GTA itself is never liable to pay tax, except where the GTA opts to pay tax under forward charge @ 12% [6% plus 6%]. Finally, till 13.10.2017, GTA was liable to pay GST in following cases-

a) when recipient of service is unregistered individual person.

b) transportation of household goods when the freight is paid by unregistered individual person.

c) services supplied to person located outside taxable territory (like transport to Nepal, Bhutan, Bangladesh) where the recipient is paying freight.

Latest Amendment for GTA under RCM & Forward Charge, w.e.f. 13.07.2022.

As per recommendation of 47^th GST Council Meeting, the Government has issued various Notifications on 13.07.2022. As per the new Notifications certain options has been provided to GTA to charge GST under forward charge and there are certain changes in Reverse Charge Mechanism (RCM) under section 9(3) of CGST Act 2017.

1. Notification No. 03/2022-CT (Rate) dated 13.07.2022 [Amendment to Notification No. 11/2017-CT (Rate) dated 28.06.2017] – Forward Charge [Under section 9(1)] of CGST Act]

2. Notification No. 05/2022-CT (Rate) dated 13.07.2022 [Amendment to Notification No. 13/2017-CT(Rates)] – Reverse Charge [Under section 9(3)] of CGST Act].

Prior to the amendment by aforesaid notifications, GTA has the following 2 options i.e.

1) The specified recipient is liable to discharge the GST @ 5% under RCM as per section 9(3) of CGST Act notified under Notification No. 13/2017-CT(Rates); or

2) The GTA may charge GST @ 12% with ITC as per Notification No. 11/2017-CT (Rate) dated 28.06.2017. In such case GTA has to discharge the GST under Forward Charge.

Amendment in Forward Charge under Section 9(1) of CGST Act vide Notification No. 03/2022-CT (Rate) dated 13.07.2022, w.e.f. 18.07.2022.

It is stated that now Government has amended the original Notification No. 11/2017-CT (Rate) dated 28.06.2017 by way of issuing Notification No. 03/2022-CT (Rate) dated 13.07.2022. By this new notification, the Government has provided an option to GTA to charge GST under Forward Charge @ 5% with the option to existing GST @ 12%. The relevant amendment in this notification is as under:-

“(IV) against serial number 9, in column (3), –

(a) for item (iii) and the corresponding entries relating thereto in columns (4) and (5), the following shall be substituted, namely: –

Under Forward Charge:- By the aforesaid amendment, in the beginning of each financial year (FY) the GTA has to choose the option either to charge GST under Forward Charge @ 5% without ITC or to charge @ 12 % with ITC. However, to choose this option for any FY, he has to applied by 15th of March of Preceding FY. For example- for FY-2023-24, the GTA need to apply the option by 15^th March, 2023.

It is pertinent to note that the department has also provide an opportunity to claim the option for FY 2022-23 also. Any GTA who wants to opt for charging GST @ 5% without ITC or 12% with ITC under Forward Charge Mechanism for FY 2022-23, it should apply the option on or before 16th August 2022. Further, such option shall be exercised by making a declaration provided in Annexure-V to Notification No. 03/2022-CT (Rate) dated 13.07.2022.

Amendment in Reverse Charge Mechanism under Section 9(3) of CGST Act vide Notification No. 05/2022-CT (Rate) dated 13.07.2022, w.e.f. 18.07.2022.

Please note that now the Government has amended the original Notification No. 13/2017-CT(Rates) by way of issuing a new Notification No. 05/2022-CT (Rate) dated 13.07.2022. As per this new Notification, the Specified Service recipient need to discharge GST under RCM if GTA had not opt for forward charge payment of GST as provided under Notification No. 03/2022-CT (Rate) dated 13.07.2022.

The relevant amendment in this notification is as under:-

“In the said notification, in the Table, –

(1) against serial number 1, in column (2), – 

(a) the words, figures and symbols “who has not paid central tax at the rate of 6%,” shall be omitted;

(b) after the proviso the following proviso shall be inserted, namely: –

 “Provided further that nothing contained in this entry shall apply where, –

i. the supplier has taken registration under the CGST Act, 2017 and exercised the option to pay tax on the services of GTA in relation to transport of goods supplied by him under forward charge; and

ii. the supplier has issued a tax invoice to the recipient charging Central Tax at the applicable rates and has made a declaration as prescribed in Annexure III on such invoice issued by him.”;

Please note that if the service recipient received a Tax Invoice from the GTA containing the declaration (mentioned in Notification No. 05/2022-CT (Rate) dated 13.07.2022 that the GTA has opted for Payment of Tax under Forward Charge, then the service recipient is not required to pay tax under RCM.

“Annexure III

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.”.

Please note that in the absence of such Tax Invoice and Declaration as per Annexure-III of the Notification No. 05/2022-CT (Rate) dated 13.07.2022, the specified service recipient is liable to discharge GST Under RCM.

Now, after the aforesaid amendment GTA has the following options i.e.

1) Does not opt to pay GST under Forward Charge: The specified recipient is liable to discharge the GST @ 5% under RCM as per section 9(3) of CGST Act notified under Notification No. 13/2017-CT(Rates) [if GTA does not opt for forward charge payment of GST as provided under Notification No. 03/2022-CT (Rate) dated 13.07.2022.]; or

2) Opt to pay GST under Forward Charge:

a) The GTA may charge GST @ 5% without ITC; or

b) The GTA may charge GST @ 12% with ITC.

In such case GTA has to discharge the GST under Forward Charge.

Conclusive Points: 

1. Now, w.e.f. 18^th July, 2022, the GTA has been provided with an option to chose either charge GST @ 5% without ITC or @ 12% with ITC under Forward Charge whereas earlier it was only 12% with ITC under Forward Charge.

2. If GTA does not choose the option of payment of tax under Forward Charge, the recipient is liable to discharge the GST @ 5% under RCM as per section 9(3) of CGST Act notified under Notification No. 13/2017-CT(Rates).

3. The option to pay tax under forward charge for any Financial Year, shall be choose by GTA by 15^th March of Preceding FY.

4. However, GTA wants to choose the option to pay tax under forward charge for FY 2022-13, then it has to apply by GTA on or before 16^th August, 2022.

5. The GTA choosing the option of Forward Charge, shall issue Tax Invoice to recipient, containing the declaration (mentioned in Notification No. 05/2022-CT (Rate) dated 13.07.2022).

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