Background of levying tax on the services of Goods Transport Agency
The levy of Service Tax on Road Transportation Service has always been a debatable issue. The Finance Act, 1997 and 2004 had levied Service Tax on Goods Transport Operators (Transport of Goods by road) w.e.f. 16-11-1997 and 10-09-2004 respectively, which was subsequently withdrawn Due to nation-wide strike.
The Government thereafter constituted a Committee to deal with the issue and after taking into account the recommendations of the Committee, Notification Nos. 32 to 35/2004 – ST all dated 03-12-2004 were issued, levying tax on Transport of Goods by Road with effect from 01-01-2005.
The legal position prevailing under Service Tax is being continued under the GST regime. The services of transportation of goods by road (except services of GTA) continue to be exempt even under the GST regime.
The following discussion will clarify the position.
Transportation of Goods by Road:
In terms of Notification no. 12/2017-Central Tax (Rate) dated 28.06.2017 (SR.NO.18)the following services are exempt from GST:
(a) Services by way of transportation of goods By Road (Heading 9965) and
(b) Services by way of transportation of goods By Inland Waterways
But, If the services by way of transportation of goods By Road are provided by:
(a) A Goods Transportation Agency (GTA),
(b) A Courier Agency
In that Case it will be liable to GST.
GTA (Goods Transport Agency):
As per Section 65 (26) of the Finance Act, 1994: Goods Transport Agency (GTA) means any person who provides service in relation to transport of goods by road by issuing a consignment note, by whatever name called. It is a mandatory requirement to issue a consignment note to be known as GTA.
Position under GST:
Under GST laws, the definition of Goods Transport Agency is providedin clause (ze) of notification no. 12/2017-Central Tax (Rate) dated 28/06/2017.
(ze): GTA means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called, Thus, it can be seen that issuance of a consignment note is the mandatory requirement 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 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 its safe delivery to the consignee.
As a corollary, the services provided by individual transporters who do not issue a consignment note will be covered by the entry (at S.NO.18) of notification no. 12/2017-Central Tax (Rate), which is exempt from GST.
Consignment Note is neither defined in the Act nor in the notification no. 12/2017-Central Tax (Rate). Guidance can be taken from the meaning prescribed to the term under the Explanation to Rule 4B of Service Tax Rules, 1994.
In terms of the said rule, 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.
A Consignment Note Should Contain the following:
1. It should be serially numbered.
2. It should contain the name of consignor and consignee.
3. Registration no of the goods carriage in which goods are transported (RC OF GADI).
4. Details of the goods sent.
5. Place of Origin and place of Destination.
6. person liable to pay GST: Consignor or consignee or
Other Services Provided by the GTA:
GTA not only provides the services of transportation of goods by road but also includes anotherancillary services example:
1. Loading / unloading
2. Packing / Unpacking
3. Tran shipment
4. Temporary Warehousing etc.
If these services are provided separately by the GTA in that case these will be charged To GST Separately (@18%).But if, these services are provided by the GTA as a means of transportation of goods then these will be exempt from GST.
Rate of GST in case of GTA:
A) If GTA Provides the Services In relation to Carrying the Following:
1. Agriculture Produce
2. Milk, salt and food grain including flour, pulses and rice
3. Organic manure
4. Newspapers or magazines registered with the registrar of Newspapers
5. Relief materials meant for victims of natural or manmade disasters(Corona)
6. Defense or military equipment
In this case rate of GST Will be 0%
B) If GTA provides Services in relation to carrying goods, where Freight charged by the GTA in a single carriage does not exceed Rs 1,500. There can be multiple Consignment Notes or Multiple Consignees in this case.
In this case also rate of GST will be 0%
C) If GTA provides Services in relation to carrying goods, where Freight charged by the GTA for transportation from a single consignee does not exceed Rs 750.
In this case also rate of GST will be 0%
Example: If GTA Provides Services to Balaji Industries and Also to Deep Plastics,
Freight charged from Balaji Industries is Rs 900 (exceeding Rs 750) and from Deep Plastics Rs 500 (Not exceeding Rs 750), Total freight charged from single goods carriage is Rs (900+500) = 1400 which does not exceed Rs 1500.
Now, whether Balaji industries will be liable to pay GST in this case as freight charged by GTA exceed Rs 750?
(Ans is No)
Balaji Industries will demand a certificate from the GTA, in which GTA will mention that total freight charged from a single goods carriage does not exceed Rs 1,500, and Balaji Industries will claim exemption from GST on the basis of this certificate.
D) If GTA Provides Services in Relation to Carrying Used Household Goods for Personal Use:
In this case also rate of GST will be 0%
E) If GTA Provides Services to The Following Specified Persons In that case Rate of GST will be Either 5% With No ITC (Under RCM) or 12% (6%+6%)WithITC (Under ForwardCharge) If the recipient of services is located in the taxable territory:
1. Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or
2. 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
3. any co-operative society established by or under any law; or
4. any person registered under the Central Goods and Services Tax Actor 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
5. anybody corporate established, by or under any law; or
6. any partnership firm whether registered or not under any law including association of persons; or
7. any casual taxable person.
Note: ITC of the GST paid will be allowed to the person who is paying GST under RCM (AND GST under RCM will have to be paid in Cash Only)
Note: GTA has to Decide at the beginning of the financial year whether to opt Forward Charge or RCM. If the GTA has opted for the RCM, in that case GST will be paid by the Recipient of Services under RCM. (5% without ITC to GTA),
Note: If GTA has Opted forward Charge, rate of GST will be 12% (6+6) and ITC will be available to GTA.
Note: As per Notification no 12/2017, CTR updated, entry no 21A, If GTA providing services to unregistered persons then it will be exempt from GST.
Who Will Pay GST Under Reverse Charge:
As Per Notification no 13/2017 dated 28/06/2017, the person who pays or liable to pay freight for the Transportation of goods by road in goods carriage TO GTA, located in taxable territory shall be treated as receiver of Service And he will be liable to pay GST.
1. If Payment of Freight is made by the Sender (consignor): In this case sender will be treated as the Recipient of services and if he belongs to the Specified persons category then he will pay GST on RCM Basis.
2. If Payment of Freight is made by the receiver (Consignee):
In this case Receiver will be treated as the Recipient of services and if he belongs to the Specified persons category then he will pay GST on RCM Basis.
Place of Supply For GTA:
The Place of Supply of services by way of Transportation of goods, including by mail or Courier to:
A). A registered Person, shall be the location of such person,
B). A person other than a registered person, shall be the location at which such goods are handed over for their Transportation.
Whether GTA is liable to get registration in each and every Situation:
As per Notification No 5/2017 dated 19/06/2017 and with reference to sec 9(3) of CGST Act 2017 , A GTA does not have to register under GST if he is exclusively transporting goods where the total tax is required to be paid by the recipient under reverse Charge Basis even if Turnover of GTA exceeds Rs 20 Lacs (Threshold Limit).
The above discussion shows that not all transport of goods by road is by a GTA. To qualify as services of GTA, the GTA should be necessarily issuing a consignment note. Only services provided by a GTA are taxable under GST. Services of transportation of goods by a person other than GTA are exempt.
Moreover, in cases where the service of GTA is availed by the specified categories of persons in the taxable territory, the recipients who avail such services are the ones liable to pay GST and not the supplier of services unless the GTA opts for collecting and paying taxes @ 12% (6% CGST + 6% SGST).
In all other cases where GTA service is availed by persons other than those specified, the GTA service suppliers will be liable to pay GST. The GTA service suppliers not entitled to take ITC on input services availed by him if tax is being charged @ 5% (2.5% CGST + 2.5% SGST).
In case the GTA service supplier hires any means of transport to provide his output service, no GST is payable on such inputs.
In a nutshell, The law recognizes that pure transportation of goods services are mostly provided by persons in the unorganized sector and hence has specifically excluded such operators from the tax net.
In respect of those who provide agency services in transport, the liability is cast on the recipients in most of the cases or unless option to pay under forward charge has been exercised by the GTA.