The levy of tax on services of transportation of goods by road has always remained a subject matter of uncertainty and litigation. Under erstwhile service tax regime, service tax was first levied on such services vide Finance Act, 1997 effective from November 16, 1997 which was subsequently withdrawn after nation-wide strikes. Thereafter by the Finance (No. 2) Act, 2004, service tax was again levied on services provided by Goods Transport Agency (‘GTA’) with effect from September 10, 2004. However, the levy was again deferred in view of transporters strike. The Government thereafter constituted a committee to study the matter. Taking into account the recommendations of the Committee, Notification Nos. 32 to 35/2004 – ST all dated December 03, 2004 were issued, wherein tax was finally levied on services for transportation of goods by road effective from January 01, 2005.
Somehow, the earlier uncertainties and confusions have now been carried over to GST laws also which has been implemented in India effective from July 01, 2017 subsuming certain indirect tax laws including service tax. In this article, an attempt has been made to analyse provisions, like taxability, exemptions, registration, input tax credit etc., in respect of services provided by a GTA with reference to latest provisions of the law, rules, notification and circulars issued thereunder.
In terms of serial no. 9 of Notification 11/2017-CT dated June 28, 2017, a 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.
‘Consignment Note’ meaning
A consignment note has not been defined under GST laws and reference for the same may be taken from the explanation to Rule 4B of Service Tax Rules, 1994 in terms of which it 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.
From the above, it may be noted that for the purposes of services being taxed as services by GTA, such service provider must issue a consignment note, in terms of the definition given for the term under notification 11/2017-CT.
In its ruling in the case of Uttarakhand Forest Development Corporation, Uttarakhand Authority for Advance Ruling observed that purpose of issuing consignment note 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. Hence, where any such document is issued by which the goods are handed over to the transporter and responsibility of such transporter is established to transport the goods to the consignee, it may be construed as consignment note, for the purposes of treating as services by GTA.
Also, in terms of CBIC flyer on GTA services, issuance of a consignment note is the sine-qua-non for a supplier of service 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. It is only the services of such GTA, who assumes agency functions, that is being brought into the GST net. Individual truck/tempo operators who do not issue any consignment note are not covered within the meaning of the term GTA.
Significance of words ‘in relation to’
The use of phrase ‘in relation to’ has extended the scope of definition of GTA. Hence, not only services of transportation of goods are covered within the taxation net, but services in relation to such transportation of goods would also be covered. Hence, services like loading-unloading, packing-unpacking, trans-shipment, temporary warehousing, if provided as a part of transportation services and not independent services, shall also be covered within the meaning of services of goods transportation by GTA.
Exemptions, if any
In terms of S. no. 18 of Notification 12/2017-CT (Rate) dated June 28, 2017, services by way of transportation of goods by road are exempt except when such services are provided by a GTA or a courier agency. Hence, services of transportation of goods by road by a GTA are taxable subject to the following further relaxations given by the notification mentioned above;
1. Services provided for transportation of agricultural produce
2. Services provided for transportation of goods where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed INR 1500/-.
3. Services provided for transportation of goods where consideration charged for transportation of all such goods for a single consignee does not exceed INR 750/-.
4. Transportation, in a goods carriage, of milk, salt, and food grains including flour, pulses and rice, organic manure, newspaper or magazines registered with the Registrar of Newspapers.
5. Transportation of relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap.
6. Transportation of defence or military equipments.
7. Services provided by a GTA by way of transport of goods in a goods carriage to a department or establishment of Central Government or State Government or Union territory or local authority or Governmental agencies which has taken registration under GST Laws only for the purposes of deducting tax under section 51 of the CGST Act and not for making a taxable supply of goods or services or both.
Also, in terms of S.no 22 of Notification 12/2017-CT (Rate) dated June 28, 2017, services by way of giving on hire, a means of transportation of goods to a GTA, is exempt from GST. Hence, if GTA hires a means of transportation of goods, no GST is payable on such transactions.
Tax rate applicable
In terms of Notification no. 20/2017-CT (Rate) dated August 22, 2017, services of goods transport agency are taxable at 5% or 12% (6% CGST and 6% SGST or 12% IGST as the case may be) subject to the conditions mentioned in the said notification. Tax rate of 5% shall be applicable subject to the condition that the credit of input tax charged on goods and services used in supplying the services has not been taken. Where the tax rate applicable is subject to the conditions that credit of input tax is not taken, it means that credit of input tax charged on goods or services used exclusively in supplying those services has not been taken. Where input or input services are used partly for supplying such (GTA) services and partly for effecting other supplies eligible for input tax credit, the input tax credit charged on such inputs or input services is reversed as if such (GTA) service is an exempt supply and attracts the provisions of section 17(2) of the CGST Act, 2017 read with rule 42 of the CGST Rules. Where tax rate opted for is 12%, supplier of services, providing transport services, shall be liable to pay tax at 12% on all services of GTA supplied by it. Further, input tax credit shall be admissible for inputs or input services used in supplying these services.
Services provided by a GTA are taxable either in forward charge mechanism or reverse charge mechanism. In terms of Notification No. 13/2017-CT (Rate) dated June 28, 2017, as amended vide Notification No. 22/2017-CT (Rate) dated August 22, 2017, where supplier of GTA services does not opt to pay tax at the rate of 12% (6% CGST and 6% SGST or 12% IGST, as the case may be), supply of services in such cases shall be taxed under reverse charge mechanism at the rate of 5% (2.5% CGST and 2.5% SGST or 5% IGST, as the case may be). Further, where rate of tax opted is 5%, GTA service supplier shall not be entitled to avail credit in terms of the condition as provided by Notification 20/2017-CT (Rate) dated August 22, 2017. Where tax rate opted for is 12%, such supply of service shall be chargeable to tax under forward charge mechanism.
Person liable to pay tax, in case of RCM
Where RCM provisions are attracted, following persons located in taxable territory shall be liable to pay tax in respect of GTA services;
1. Factory registered or governed by the Factories Act, 1948;
2. Any society registered under Society Registration Act 1860 or under any other law for the time being force in any part of India;
3. Any co-operative society established by or under any law;
4. Any person registered under CGST/IGST/SGST/UTGST Acts;
5. Body corporate established by or under any law;
6. Any partnership firm whether registered or not under any law including association of persons;
7. Any casual taxable person
Position of ITC, paid on GTA services
Where the GTA is not eligible to take ITC for the supplies effected by it and the liability under GST is discharged under reverse charge basis, the recipient of GTA service discharging the tax liability is entitled to take Input Tax Credit (ITC) of the amount of tax paid under reverse charge, provided it is used in the course or furtherance of business at his end. Further the recipient would be eligible for ITC of the GST paid by GTA on forward charge basis.
Liability of GTA to register under GST laws
In terms of Notification 05/2017- CT dated June 19, 2017, where a person is engaged in making supply of goods or services or both, the total tax on which is liable to be paid on RCM basis by the recipient of such supply, person supplying such goods or services or both shall be exempted from registration requirements. Hence, a GTA service supplier is not liable to be registered under GST laws, if it is supplying exclusively to recipients who are liable to pay tax under RCM, even if turnover exceeds the threshold limit.
Any GST compliant invoice of a GTA must have details like name of the consignor and the consignee, registration number of goods carriage in which the goods are transported, details of goods transported, gross weight of the consignment, details of place of origin and destination, GSTIN of the person liable for paying tax whether as consigner, consignee or goods transport agency, name, address and GSTIN (if applicable) of the GTA, tax invoice number (it must be generated consecutively and each tax invoice will have a unique number for that financial year), date of issue, description of service, taxable value of supply, applicable rate of GST (Rates of CGST, SGST, IGST, UTGST and cess clearly mentioned), amount of tax (with breakup of amounts of CGST, SGST, IGST, UTGST and cess), whether GST is payable on reverse charge basis, signature of the supplier.
Place of supply, in case of GTA services
Sub-section (8) of section 12 of IGST Act provides for the place of supply of goods transportation services. It provides that, where;
1. Services are provided to a registered person, place of supply of such services shall be the location of the such person i.e. recipient
2. Services are provided to a person other than a registered person, place of supply of such services shall be the location at which the goods are handed over for their transportation.
Effective February 01, 2019, proviso has been inserted in section 12(8) to provide that where the transportation of goods is to a place outside India, place of supply of such services shall be the destination of the goods.
Now, here the question arises whether credit in respect of services of transportation of goods where the goods are transported outside India, making place of supply of such services outside India, being the destination of the goods, be available to a recipient in India. A suitable clarification from the Government should be issued in this respect for appropriate treatment for such credit.
From the above discussion it may be seen 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 and 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 are liable to pay GST unless GTA opts for collecting and paying taxes @ 12.
In a nutshell, the GST law continues the provisions prevailing under the Service Tax regime. The law recognises that pure transportation of goods services are mostly provided by persons in the unorganised 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.
Views expressed in this article are personal views of the author and are for guidance purposes only. Although care has been taken in compiling and checking the information contained herein, however, we make no representations or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability or completeness of any information. It is further advised that the information above should not be treated as legal advice and should not be acted upon in business scenarios. An appropriate legal/professional advice should be taken prior to acting upon the above while undertaking business transactions.