1. Introduction
1.1 Transportation and Logistics is an important aspect of any economy and vital component of businesses. It is this part or activity which is responsible for movement and/or flow of goods from the place of manufacture to the end consumers. Approx. 14% of the Gross Domestic Product (GDP) is spent on transport and Logistics sector in India in comparison to 8 to 10% in other developed countries. Indian Logistics and Transportation sector comprises of Rail, Road, Water and Air Transport. The high cost of logistics in India has come into sharp focus as one of the key factors affecting the country’s cost competency. Inefficient logistics account for about 2% of the country’s GDP and with road transport accounting for nearly 65% of total freight movement in the country. Improving the road infrastructure will have a direct bearing on the country’s cost competency and economic growth.
1.2 Earlier service tax was levied on the services of Goods Transport Operators by Finance Act, 1997 which was subsequently withdrawn after nation-wide strike. Later, by Finance Act, 2004 Government introduced service tax on Transport of Goods by road rendered by any goods transport agency. Therefore, we must bear in our mind that ‘Goods Transport Operators’ and ‘Goods Transport Agencies’ are distinct from each other and the legislature intention must be understood in this context.
2. Meaning of Goods Transport Agency service
2.1 The term ‘Goods Transport Agency’ is not defined under the CGST Act, 2017. The definition is contained in Notification No. 12/2017-CT(R) dt. 28th June 2017 under paragraph 2. Though the definition is applicable for the purpose of the said Notification, the definition can be referred for better understanding the term and it has persuasive value. The definition reads as:
‘(ze) 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’.
The same definition is provided in Notification No. 11/2017-CT(R) dt. 28th June 2017 as an explanation under heading ‘Goods transport services.’
This definition is same when compared to the definition which existed under the service tax regime u/s 65(50b) or u/s 65B(26) of Finance Act, 1994. To understand the intention of legislature, it would be pertinent to understand a bit of history and refer the extracts of budget speech:
- Budget speech of 1997-98:
“146. The services sector contributes nearly 40% of the GDP. ‘Services’ are products as such as ‘manufactured goods’. Both must bear taxes. Hence, I propose to extend the service tax to cover a number of well-known services like:
- Transportation of goods by road;
- Consulting engineers;
- Custom house, Steamer and Clearing and Forwarding agents;
- Air travel agents, tour operators and car rental agencies;
- Out-door caterers, pandal contractors and mandap keepers;
- Man-power recruitment agencies”
- Budget speech of 1998-99:
“169. In the last budget, a number of services were added in the tax net. These included the service rendered on transportation of goods by road. The House is aware that it led to wide spread resistance and protests. As a result, this service tax was virtually kept in abeyance and rightly so. I have decided to abolish the service tax on transportation of goods by road. I have also decided to abolish the service tax payable by outdoor caterers and pandal contractors.”
- Budget speech 2004-05:
“149. 58 services have been brought under the net so far. I propose to add some more this year. These are business exhibition services; airport services; services provided by transport booking agents; transport of goods by air; survey and exploration services; opinion poll services; intellectual property services other than copy right; brokers of forward contracts; pandal and shamiana contractors; outdoor caterers; independent TV/radio programme producers; construction services in respect of commercial or industrial constructions; and life insurance services to the extent of the risk premium. I may clarify that there is no intention to levy service tax on truck owners or truck operators. Nor, as was clarified by my predecessor, is there any intention to levy service tax on the savings part of the premium collected by an insurer.”
2.2 It must also be noted that in case of doubts in interpretation of statutes, speeches made by the mover of the bill on the floor of the Parliament are admissible as an aid to construe a statute. [KP Varghese vs ITO 1981 (131) ITR 597 (SC)]
From the above it becomes abundantly clear that the intention of the legislature is to levy tax on services provided by transport booking agents and not on truck owners or truck operators.
2.3 In this context it would be relevant to refer to few important judgements in this regard:
a. CCE&C, Guntur vs Kanaka Durga Agro Oil Products Pvt. Ltd. 2009 (3) TMI 130 (Tri-Bang), wherein the issue of whether the individuals owning and operating the trucks would be covered under the scope of GTA was addressed. In this case the speech of the Finance Minister was referred to and contended by the assessee that service tax was leviable on agents of truck operators/owners and not on the operators and owners themselves. It was contended that the word ‘agency’ in GTA should be construed given the definition of agent in sec. 182 of Indian Contract Act, 1872. It was held by the Hon’ble Tribunal that respondent was not liable to pay any service tax.
b. Salem vs Suibramania Siva Co-op Sugar Mills ltd. 2014 (11) TMI 925 (Mad), above case of Kanaka Durga was referred to and a view was taken that budget speech cannot be taken in aid for understanding the scope of the clear terms of the provisions in the taxation enactment. It was held that any commercial or proprietary concern carrying on the business of goods transport would fall under the definition of ‘Goods Transport Agency’.
Though the decision, supra, by Hon’ble Madras High Court considered the Bangalore Tribunal case, I am of the view that the Honorable High Court has not been able to completely distinguish the points raised in the Kanakadurga case.
However, when an organization examines this from compliance point of view it may be practically difficult for the recipient to identify and differentiate the goods transport operator and goods transport agency. So conservatively, tax may be paid and credit availed.
2.4 Words ‘In relation to’ —
The relevant Notification No. 11/2017-CT(R) dt. 28th June 2017 which specifies rate of tax uses the phrase ‘services of GTA in relation to transportation of goods.’ The question which arises is whether the phrase ‘in relation to’ used in the entry is restrictive in nature. It must be noted that in Notification the words ‘services of GTA by way of transportation of goods’ (as used in many other entries) has not been used which would have been a direct reference to the activity of transportation of goods.
Would this mean that entry covers within its scope only those services which are in relation to transportation of goods like booking activity of agent, loading, packing etc. during transportation or it would also cover the services of transportation?
The term ‘in relation to’ was analyzed and interpreted in Doypack Systems (Pvt) Ltd. Vs UOI 1988 (2) TMI 61 (SC) wherein it was held that ‘in relation to’ is a very broad expression which pre-supposes another subject matter. It was held that the words ‘pertaining to’, ’in relation to’ are not restrictive in nature. Therefore, it is possible to take a view that even though the entry uses the phrase ‘in relation to’, it is not restrictive in nature and would cover the very service of transportation of goods. In other words, services of goods transportation by an entity owning the vehicle and issuing consignment note would get covered under the said entry.
2.5 Concept of Consignment note:
The term ‘GTA’ would be relevant only in case of transport of goods by road as the definition or meaning is restricted to that and issuance of consignment note would be important as well. Now, it would be important to understand the meaning of the term ‘consignment note’ which is neither defined under GST law nor under any of the notifications. Under the service tax regime, the meaning of ‘consignment note’ was contained in explanation to Rule 4B of Service Tax Rules, 1994, according to which, “consignment note” means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the goods transport agency.
Relevant case: CCE&ST vs Jaikumar Fulchand Ajmera 2016 (10) TMI 42 (Tri-Mum) – it was observed that as per the definition of GTA, an essential characteristic of provider of service is the issuance of consignment note. Further held that revenue has adopted a specious line of reasoning and provider of GTA service cannot be determined by issuance of consignment note under the statute. It was held that it is not within the ambit of subordinate legislation to create the class of taxable persons by imposing a condition that would, perforce, bring such persons within the tax net.
M/s Om Telecom Logistics vs. CST, Delhi 2018-TIOL-1430 (Tri-Delhi) – In this case it was held that a person can be categorized as ‘GTA’ only when he issues consignment note in the manner prescribed in the statue. In the absence of consignment note, the transporters cannot be treated as GTA for the purpose of levy of Service Tax.
Green Leaf Tobaco Threshers and others vs CCE&ST, Guntur 2017 (5) TMI 518 –
it was observed that from the definition of GTA it becomes evident that consignment notes can be issued in any form i.e. by whatever name called. It was held that assessees are the service recipients and goods cannot be received without an accompanying paper/document and confirmed the service tax liability.
3. Rate of Tax & Reverse Charge Mechanism:
3.1 The rate of tax is specified in Notification No. 11/2017-CT(R) dt. 28th June 2017 and reads as under:
| Sl.no. | Heading | |||
| 9 | 9965 (Goods transport services) | (iii) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use)
Explanation.- “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. |
2.5 | Provided that credit of input tax charged on goods and services used in supplying the service has not been taken. |
| OR | ||||
| 6 | Provided that the goods transport agency opting to pay central tax @ 6% under this entry shall, thenceforth, be liable to pay central tax @ 6% on all the services of GTA supplied by it | |||
| 11 | 9967 (Supporting services in transport) | (i) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use).
Explanation.- “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 |
2.5 | Provided that credit of input tax charged on goods and services used in supplying the service has not been taken. |
| OR | ||||
| 6 | Provided that the goods transport agency opting to pay central tax @ 6% under this entry shall, thenceforth, be liable to pay central tax @ 6% on all the services of GTA supplied by it |
3.2 The services notified under reverse charge mechanism are mentioned in Nt. No. 13/2017-CT(R), as amended, dt. 28th June 2017 and GTA is covered in it. Following entry would be relevant:
| Sl.no. | Category of supply of services | Supplier of service | Recipient of service |
| 1 | Supply of services by a goods transport agency
(GTA), who has not paid central tax at the rate of 6%, in respect of transportation of goods by road to – (a) any factory registered under or governed by the Factories Act, 1948; or (b) any society registered under the Societies Registration Act, 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 CGST Act or the IGST Act or the SGST Act or the UTGST; or (e) any-body 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: Provided that nothing contained in this entry shall apply to services provided by a goods transport agency, by way of transport of goods in a goods carriage by road, to,— (a) a Department or Establishment of the Central Government or State Government or Union territory; or (b) local authority; or (c) Governmental agencies, which has taken registration under the CGST Act, 2017 only for the purpose of deducting tax under section 51 and not for making a taxable supply of goods or services. |
Goods transport agency (GTA)
|
(a) any factory registered under or
governed by the Factories Act, 1948; or (b) any society registered under the Societies Registration Act, 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 CGST Act or the IGST Act or the SGST Act or the UTGST; or (e) any-body 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; located in taxable territory
|
Based on notifications, supra, the rate of tax on GTA service and the person liable to pay the tax can be summarized as under:
> If GTA (registered) has opted to pay tax at (6+6)% à then GST is payable by GTA on forward charge basis and no restriction on availment of ITC.
> If GTA (registered) has opted not to avail ITC à then GST is payable by service recipient (‘a to g’ above) at the rate of (2.5%+2.5%) under RCM.
> If GTA (unregistered) provides services to service recipient (‘a to g’ above) à then GST is payable by service recipient at the rate of (2.5%+2.5%) under RCM.
> If GTA (unregistered) provides services to service recipient (other than ‘a to g’ above) à this transaction goes untaxed.
Disclaimer: Views expressed above are personal in nature and not to be considered as professional advice/opinion.
Author Bio
Information is only about GTA. Need information regarding other transport such as Rail and Air which are also part of transport and logistic sector under GST Act.