There are several confusions in mind of registered suppliers/recipient regarding registered/unregistered suppliers of “Transport Services” regarding rate of GST/RCM etc on Transportation of Goods when different rate items supplied in single Invoice. I have tried to sum up all concerning provisions at one place to explain provisions so during teething trouble we should have some relax of looking provisions described at different places in Act/Rules/Notifications:
1. Related Act/Rule at one place:
A.1 Charging Sections which allow to Include Transportation Cost in Invoice itself:
CGST Act, 2017 Under Section 2(30) “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;
Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply.
CGST Act, 2017 Under Section 2 (74) “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply;
Illustration: A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.
CGST Act, 2017 Under Section 8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:—
(a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and
(b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax
CGST Act, 2017 Under Section 15(2) The value of supply shall include –
(c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;
2. Rates Prescribed at different Notifications/Rate Books etc on Transportation different modes:
B.1 Even GTA is exempted in certain following services where no RCM is applicable with or without monetary limit & Other rates–
UNDER NIL RATED SUPPLY:
(a) by road except the services of—Online GST Certification Course by TaxGuru & MSME- Click here to Join
(i) a goods transportation agency;
(ii) a courier agency;
(b) by inland waterways
UNDER 5% RATED SUPPLY:
Entry No.6,7, 8 Services of Rail, Vessel, goods transport agency (GTA) in relation to transportation of goods [including used household goods for personal use]
UNDER 12% RATED SUPPLY:
Entry No.4 Transport of goods in containers by rail by any person other than Indian Railways
At item No.9 heading 9965 under residuary clause (v) Transport other than – by Rail (5%), Vesel (5%), GTA (5%), by Rail container other than railway (12%) – GST rate is 18%.
Problem wise analysis and suggestions:
Question 1 when different rate items supplied in a Single Invoice and having many items which will be dealt as “Principal Item”
Some Invoices I have seen where highest rate of GST applied as per commodity supplied in Invoice. This, I infer taken from section 8(b) concept of “Mixed Supply” so first question arises we have to dealt “Transport Cost” in bill is “Composite Supply” or “Mixed Supply”.
In any case it is not “Mixed Supply”, because these have not been offered or bundled by Supplier it is Purchaser who has ordered the items and items are sold in Single Invoice therefore applicability of section 8(b) is ruled out.
Now it is “Composite Supply” so rate is applicable with consonant to “Principal Supply”[as explained under section 2(30)]. Therefore as per Law rate of GST will be applied on other things like packing, handling, transport etc on the basis of rate applicable to “Principal Supply”.
To bring supply under “Composite Supply” following ingredients are must:
The followings points should also be noted before confirming “Composite Supply”:
Now Question arises, for example, if Grocery supplied 35 items from 0 to 28% or any other supply like in one tempo plywood, mica, fevicol etc are sent by single Invoice and at last packing/transport cost added then what rate of GST should be applied – while Transport & packing is absolutely an essential component of supply. In such cases these supplies cannot be treated as “Composite Supply” because many items are “Principal Supply” which cannot decide GST rate for Transportation etc. and not necessary to supply all items naturally.
Answer: If it is possible and supplier is having proper software support then it can be proportionately charged and if bill is manual then it should pick highest rate of GST, it is safer side because recipient will get full ITC claim therefore this cost is not to be pained anybody.
Question 2 Applicability of RCM other than GTA as defined u/s9(3) and applicability of section 9(4) of CGST Act, 2017 in case of Transport cost – by surface or by other means?
As transport by surface is exempted except GTA no other mode of transport is covered under RCM therefore either Transport cost will be charged through Invoice or a separate bill will be raised by transporter. If transporter is registered and charged as per applicable rates as given at start of article then no issue you have to pay if as per terms you have to pay, otherwise “NO NEED TO PAY GST UNDER RCM ON SURFACE TRANSPORTATION COST AS IT IS EXEMPTED EVEN WHEN YOU RECEIVED SEPARATE BILL BY TRANSPORTER THEN SIMPLY PAY HIS CHARGES WITHOUT GST (WHETHER HE IS REGISTERED OR NOT) EXCEPT WHERE TRANSPORTER IS GTA . NOTE EVEN ALONG WITH CERTAIN MONETARY LIMITS OR CERTAIN SUPPLIES WHERE GTA IS ALSO EXEMPTED AS EXPLAINED IN START OF ARTICLE.”
Question 3 Rates of GST in different modes of Transport:
Please refer starting of article where I have given, as possible as, applicable rates at a glance.
I hope this effort of keeping all points at one place will certainly help you all.
RAJIV NIGAM, FCA,