The AAR, Chhattisgarh in the matter of M/s Prahallad Ray Rekhraj Agarwal [Advance Ruling No. STC/AAR/04/2020/39 dated October 8, 2020] has ruled that no Goods and Services Tax (“GST”) will be chargeable on the hiring of a transportation vehicle by a Goods Transportation Agency (“GTA”) and also has no liability under Reverse Charge Mechanism (“RCM”).
M/s Prahallad Ray Rekhraj Agarwal (“the Applicant”) is a Proprietorship firm and is planning to venture business into the business of transportation of goods by road and will issue consignment notes. However, the Applicant does not own any goods transportation vehicle and therefore, will receive hiring services from vehicle owners wherein, the vehicle owner will have complete control over the vehicle including the driver and all incidental expenses. Further, the vehicle owner will raise invoice in the name of the Applicant and the Applicant will further raise invoice in the name of customers whose goods were transported by the Applicant.
The Applicant submitted that the services by way of providing goods transportation vehicle on hire is exempt as per Entry No. 22 (b) of Notification No. 12/2017- Central Tax (Rate) dated June 28, 2017 (“the Services Exemption Notification”) which stated that services by way of giving on hire to a goods transport agency are exempt. Therefore, no liability under RCM shall arise to the Applicant as per Notification No. 13/2017- Central Tax (Rate) dated June 28, 2017 (“the Services RCM Notification”) and no Input Tax Credit (“ITC”) can be claimed by the Applicant.
Whether the hiring service of goods transportation vehicle to a GTA is exempt from GST?
The AAR, Chhattisgarh in Advance Ruling No. STC/AAR/04/2020/39 held as under:
Entry No. 22 (b) of the Services Exemption Notification:
|Chapter, Section, Heading, Group or Service Code (Tariff)||Description of Services||Rate (per cent.)||Condition|
|22||Heading 9966 or Heading 9973||Services by way of giving on hire –
(a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or
(aa) to a local authority, an Electrically operated vehicle meant to carry more than twelve passengers; or
Explanation- For the purposes of this entry, “Electrically operated vehicle” means vehicle falling under Chapter 87 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) which is run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicle.
(b) to a goods transport agency, a means of transportation of goods.
(c) motor vehicle for transport of students, faculty and staff, to a person providing services of transportation of students, faculty and staff to an educational institution providing services by way of pre-school education and education upto higher secondary school or equivalent.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, CHHATTISGARH
[U/s 98 of the Chhattisgarh Goods & Services Tax Act, 2017 (herein- after referred to as CGGST Act, 2017)]
Raipur Dated 08/10/2020
M/s Prahallad Ray Rekhraj Agrawal, Bazar Para, Neora, Raipur Chhattisgarh [hereinafter also referred to as the applicant] has filed an application U/s 97 of the Chhattisgarh Goods & Services Tax Act, 2017 seeking advance ruling on :-
(i) Whether the services taken by the applicant from the owner of the Goods transportation vehicle, are exempt or taxable?
(ii) If such services are taxable, what will be the classification of such services?
(iii) If such services are taxable, whether the applicant is liable to pay the tox thereon under reverse charge mechanism as per Sec 9(3) of Central Goods and Services Tax, 2017?
(iv) If the applicant is liable to pay the tax on reverse charge basis, then what is the rate at which tax would be applicable?
(v) If the supply is taxable, whether the applicant will be able claim ITC for the GST paid on this supply.
2. Facts of the case:-
The applicant is a Proprietorship firm based in Chhattisgarh and is already registered under Central Goods and Services Tax Act, 2017 and Chhattisgarh Goods and Services lox Act, 2017 with GSTIN GSTIN-22ACIPA58171H3ZY.
2.2 The applicant is planning to venture into the Business of Transportation of Goods by Road.
2.3 Under the proposed model, the applicant will provide the services of Transportation of goods and will issue Consignment Note containing all the required details.
2.4 The applicant however does not own any Goods Transportation Vehicle and will hence receive services from the persons who own Goods Transportation Vehicle.
2.5 The Vehicle Owner (from whom the applicant shall receive service) will have complete control over the vehicle including the driver, and all incidental expenses will be borne by the Service Provider.
2.6 The Vehicle Owner will raise invoice in the name of the applicant on the basis of weight, distance, etc and the Applicant will further raise invoice to the entities (Customers) whose goods were transported by the applicant, on similar basis.
3. Contentions of the Applicant:- The applicant’s contention is as under :-
3.1. The applicant is of the opinion that the services of providing Goods Transportation Vehicle on Hire is exempt as per Entry No. 22 (b) of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 which states that Services by way of giving on hire to a goods transport agency, a means of transportation of goods are exempt.
3.2. The applicant has classified the services received by them as Hiring of Goods Transportation Vehicle.
3.3. Since, as per applicant the discussed supply is exempt, no liability under Reverse Charge Mechanism shall arise to the Applicant vide Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017.
3.4. Since, the Supply is exempt in view of the applicant, no tax rate shall be applicable on the same.
3.5. Since, the supply is exempt in view of the applicant, no ITC can be claimed by the applicant.
4. Personal Hearing:-
Keeping with the established principles of natural justice, personal hearing in the matter was extended to the applicant and accordingly their authorized representative Shri Prakhar Jain, C.A. and Shri Ashish Agrawal (son of the applicant) appeared before the authority for hearing on 17/07/2020 and reiterated their contention. They also furnished a written submission dated 17/07/2020 which has been taken on record.
5. The legal position, Analysis and Discussion:-
5.1 At the very outset, we would like to make it clear that the provisions for implementing the CGST Act and the Chhattisgarh GST Act, 2017 [hereinafter referred to as “the CGST Act and the CGGST Act”] are similar and thus, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the CGGST Act, 2017. Now we sequentially proceed to discuss the issues involved in the ruling so sought by the applicant and the law as applicable in the present case.
5.2 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. In so far as the services of GTA are concerned, if the services (of Goods Transportation) are provided (by the GTA) to specified classes of persons, the tax liability falls upon such recipients under the reverse charge mechanism as discussed hereunder.
5.3 In terms of Notification no. 12/2017-Central Tax (Rate) dated 28.06.2017 (sr.no.18), the following services are exempt from GST Services by way of transportation of goods (Heading 9965):
(a) by road except the services of:
(i) a goods transportation agency;
(ii)a courier agency;
(b) by inland waterways.
Thus, mere transportation of goods by road, unless it is a service rendered by a goods transportation agency, is exempt from GST.
5.4 As per Section 65B (26) of the Finance Act, 1994; “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”. Therefore, in the Service Tax regime, issuance of Consignment Note (C/N) was integral and mandatory requirement before any road transporter could be brought within the ambit of GTA.
Under GST laws, the definition of Goods Transport Agency is provided in clause 2 (ze) of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017.
(ze) “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;
Thus, it can be seen that issuance of a consignment note is an indispensable condition and is a must 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.
5.5 The applicant has in their application submitted that they would be issuing consignment notes while providing the services of Transportation of goods. Thus the applicant is a Goods Transport Agency GTA and it is in this context, they have sought advance ruling as regards taxability, its classification, rate of tax and eligibility to Input tax credit, on the services of receipt of transportation vehicles on hire from the persons who own such Goods Transportation Vehicle to be used for providing the said services of Transportation of goods.
5.6 As per Notification no.12/2017-Central Tax (Rate) dated 28.06.2017 (sr.no.22), the following services received by the GTA (Heading 9266 or 9973) is exempt from payment of tax.
|SI. No.||Chapter, Section, Heading,
Group or Service Code
|Description of Services||Rate (per
|22||Heading 9966 or Heading
|Services by way of giving on hire – (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers: or (b) to a goods transport agency, a means of transportation of goods.||Nil||Nil|
Thus, if the GTA hires a means of transportation of goods, GST payable would be Nil on such transaction. we thus come to the considered conclusion that the service by way of giving on hire a means of transportation of goods to the applicant GTA, is exigible to Nil rate of GST as stipulated under Notification number 12/2017-Central Tax (Rate) dated 28th June 2017. Further when no tax is paycble, the question of taking any input tax credit does not arise.
6. Having regard to the facts and circumstances of the case and discussions as above, we pass the following order:-
(Under section 98 of the Chhattisgari Goods and Services Tax Act, 2017)
Raipur Dated 08/10/2020
The ruling so sought by the Applicant is accordingly answered as under:
1. The services by way of giving on hire to the Applicant (goods transport agency) a means of transportation of goods, is taxable at Nil rate as per entry No. 22 (b) of Notification number 12/2017-Central Tax (Rate) dated 28th June 2017
ii. The above service is classifiable under Heading No. 9966: Rental services of transport vehicles with or without operators.
iii & iv. Since, such supply is taxable at rare as above, no liability under Reverse Charge ,Mechanism shall arise upon the Applicant under Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017.
iv. As the instant supply is taxable at Nil rate, there is no question of taking any Input tax credit.
(Author can be reached at firstname.lastname@example.org)