pri GST rate on GTA Services under RCM – 12% or 5%? GST rate on GTA Services under RCM – 12% or 5%?

In accordance with Notification No. 11/2017- Central Tax (Rate) dated 28th June, 2017, GST under Reverse Charge Mechanism is payable on supply of services by a goods transport agency (GTA) in respect of transportation of goods by road to-

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

-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

-any co-operative society established by or under any law; or

-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

-any body corporate established, by or under any law; or

-any partnership firm whether registered or not under any law including association of persons; or

-any casual taxable person.

What to pay - CGST & SGST or IGST on GTA Services - Divergent Issues in POS

Further, CBIC Schedule of GST Rates provide the following rates in respect of goods transport services by GTA:

Chapter / Section / Heading Description of Service CGST
Heading 9965
(Goods transport services)
(iii) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use). 2.5 2.5 5 Provided that credit of input tax charged on goods and services used in supplying the service has not been taken.
Heading 9965
(Goods transport services)
(iii) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use 6 6 12 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.

It must be noted that the aforesaid entries lay down respective conditions for charging different rates (whether 5% or 12%) on basis of admissibility of ITC by service provider i.e. the Goods Transport Agency(GTA).

However, as this service is also taxed under RCM basis, such aforesaid provision leads to lack of clarity for the rate applicable for GST Liability under RCM – 12% or 5%. Again, both the rates have conditions attached to them seeming as if onus of such liability was on the GTA.

Since the rate – 5% is much more preferable, owing to less cash outflow & lower taxation, applying such rate gives way to another uncertainty as to whether ITC shall be available on the same to service receiver. It should be kept in mind that the conditions attached to such rate i.e. 5% restrict availment of ITC on the GTA (service provider).

The aforesaid uncertainty is clairified by CBIC itself.

An extract of Sectoral FAQs issued by CBIC for ‘Transport & Logistics’ is as follows:

Question 10: Please clarify whether input tax credit is available to the recipient of service, when the GST paid by him is at a concessional rate of 5% under RCM.

Answer: Yes, input tax credit is available in such cases.

The aforementioned answer by CBIC gives solution to our predicaments, as it accepts both the GST rate – 5% as well as the admissibility of ITC on the same.

Note: The said FAQs can be accessed at→GST→myGST→FAQs→Sectoral FAQs→Transport & Logistics

Disclaimer: The views expressed here are of author, and in no way, is substitute for professional legal advice. As such, the readers are advised to apply their own discretion and go through the law as prevailing at the time of reading the article and take professional advice before taking action based such views.

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Qualification: Student - CA/CS/CMA
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Location: New Delhi, IN
Member Since: 12 Jan 2019 | Total Posts: 1

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  1. Umesh Hallikeri says:

    Iam umesh Accountant in transport company my question is transport company is registered in Gst and raised invoice to gst registered company who should pay tax payable

    1. Shubham Barnwal says:

      You have two options:
      1. If you want to avail ITC on your purchases & expenses, you can opt to pay GST under 12% Rate yourself and charge it in Invoice to your customers.
      2. You can issue invoice without GST, and your registered customers will be liable to pay GST@5%.

  2. Jitin says:

    goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage is less than Rs. 1,500..

    No mention of these logics in this article

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July 2021