GTA and Place of Supply of Service

The transportation of goods by road, is the backbone of Industries, without transportation, it is next to impossible to carry business. In this article we shall discuss the place of supply of service of transportation of goods by road. Before discussing the place of supply of service of transportation of goods by road, we need to travel though some other provision of Act. The Section 9(3) of CGST Act, 2017 and Section 5(3) of IGST Act, 2017 are identical and same is reproduced below: –

“(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.”

On going through the above, provision, it is ample clear that the tax liability is shifted on the recipient of goods and /or services. The liability to pay tax by the recipient is only on the specified category of goods and / or services. The definition of term ‘recipient’ of goods and/or services is given at Section 2(93) and clause (a) is given below”-

“(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; ……”

From above, it is clear that person who is liable to pay that consideration is the recipient of the goods and /or services. It is also clear that person making payment of GTA services is the recipient of service and person is also liable to pay tax as recipient of services.

2. Generally, if supplier and recipient of the goods and /or service are in same state or Union territory, it is an intra-state supply and CGST + SGST is applicable and if the supplier and recipient of the goods and / or service are in different state or union territory, it is an inter-state supply and IGST is applicable, which is given at Section 7 and Section 8 of IGST Act. If location of supplier or location of recipient would be of necessity then drafting and inserting of sub-section 12(8) and term ‘subject to…’ was not warranted. Further, it is the rule of interpretation that when general and specific provision are available, on should go for specific clause/ provision. Section 12(8) of IGST Act, is specifically for service by way of transportation of goods and same is reproduced below for ready reference:-

“(8) 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.”

2.1 It is the rule of interpretation that in a statute no words should be added or taken out. Here, we can see those words such as location of supplier or location of recipient or fixed establishment etc., which are defined but not mentioned in the statute, therefore, it is not wise to bring out any interpretation with words which are not present in the statute, in simple language, one should avoid addition or substitution of words where meaning is plain and unambiguous.

2.2  If we simplify above, it would read as under: –

“The place of supply of service by way of transportation of goods to a registered person, shall be the location of such person” i.e., location of the registered person”. On plain reading, it is very clear that the place of supply of service will be the location of the registered person. The service of GTA (other than paying 12% as forward charges) with respect to above provisions, can be understood well by way of illustration given below: –

Illustration-1:- M/s. ABD, manufacturing of pet bottles registered in the state of Gujarat, agreed to sell the required quantity to M/s. MUM, of Mumbai, registered in Maharashtra. The deal was that it will be the responsibility M/s. ABD to make goods available at the premises of M/s. MUM. For this purpose, M/s. ABD hires GTA services of M/s. ATG. The freight is paid or payable by M/s. ABD.

In this case, as supply of service by way of transportation of goods is supplied to M/s. ABD, the location of the registered person (as service of GTA by M/s. ATG are supplied to M/s. ABD) the place of supply of service will be Gujarat and M/s. ABD will pay CGST + SGST on RCM basis.

Illustration-2 :- M/s. ABD, manufacturing of pet bottles registered in the state of Gujarat, agreed to sell the required quantity to M/s. MUM, of Mumbai, registered in Maharashtra. M/s. ABD arranges for transportation of goods and freight is paid or payable by M/s. MUM (TO PAY basis). Now, M/s. ABD, appoints M/s. ATG for transportation of goods.

In this case, the freight is paid or payable by M/s. MUM, therefore, M/s. MUM is recipient of services and the place of supply of service will be Maharashtra as services are provided to M/s. MUM. M/s. MUM will pay CGST + SGST on RCM basis.

Illustration-3:- M/s. ABD, manufacturing of pet bottles registered in the state of Gujarat, agreed to sell the required quantity to M/s. MUM, of Mumbai, who is not a registered person. The deal was M/s. ABD will arrange for transportation of goods and freight is paid or payable by him.

In this case, as the freight is paid or payable by M/s. ABD, the place of supply of service will be Gujarat and being a registered person M/s. ABD will pay CGST + SGST on RCM basis.

Illustration-4 :- M/s. ABD, Gujarat is dealer of pet bottles, not registered agreed to sell the required quantity to M/s. MUM, of Mumbai, registered in Maharashtra. The deal was M/s. MUM will arrange for transportation of goods. Now, M/s. MUM, hires M/s. ATG and freight is paid or payable by M/s. MUM.

In this case, as the freight is paid or payable by M/s. MUM, the place of supply of service will be Maharashtra and M/s. MUM will pay CGST + SGST on RCM basis.

Illustration-5:- M/s. ABD, Gujarat is dealer of pet bottles, not registered, agreed to sell the required quantity to M/s. RJK, of Rajkot, in Gujarat. The deal was M/s. ABD will arrange for transportation of goods. Now, M/s. ABD, hires M/s. ATG and freight is paid or payable by M/s. ABD.

In this case, as the service by M/s. ATG is provided to unregistered person (clause (b)) i.e., M/s. ABD, if the goods are handed over for transportation at Ahmedabad, Gujarat, the place of supply of service will be where goods are handed over for transportation i.e., Ahmedabad, Gujarat. M/s. ATG will collect CGST + SGST from M/s. ABD.

3. To support above view the relevant abstract of fliers, issued by the board, is reproduced below :-

“Thus, in cases where services of GTA are availed by the above categories of persons in the taxable territory the GTA supplier has the option to pay tax (and avail ITC) @12% (6% CGST + 6% SGST); and if the GTA does not avail this option, the liability to pay GST will fall on the recipients. In all other cases where the recipients do not fall in the categories mentioned above, the liability will be on the supplier of GTA services.”

“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 supplier is the person liable to pay GST.” (for specified persons please refer Sl.No. 1 of Notification No.13/2017-CT (Rate) dated 28.06.2017).

4. If we peruse, Notification No.13/2017-CT (Rate) dated 28.06.2017, as amended from time to time, on referring the heading of the table, it is clarified that to whom GTA services are supplied, who is supplier of service and who is the recipient of service and liable for payment of tax.

5. The above views are just to determine the place of supply of service of transportation of goods by road and other provisions such as compulsory registration or valuation or E-way Bill etc., are not dealt with.

Please Note :- The views expressed in this article is for information purpose only and not for any other use.