A Quick Understanding on Reverse Charge Mechanism (RCM) on Goods Transport Agency (GTA) Services
It has been more than a couple of years since GST was launched on 1st July 2017 but the organisations are yet to get settled down and adopt it with full clarity. Since the time GST was rolled out, there have been numerous amendments and also there is a fair amount of lack of clarity in the interpretation of some of the provision of the Act; the provision related Reverse Charge Mechanism (RCM) on Goods Transport Agency (GTA) is one of such subjects on which taxpayers have queries all the time even now.
Though the subject of Reverse Charge Mechanism (RCM) on Goods Transport Agency (GTA) is not new, still in this article we would try to discuss & understand this topic in a layman manner so that we can have the requisite clarity about the related provisions of the Act.
What are the GTA Services?
As per Notification No. 11/2017- Central Tax (Rate) dated 28th June, 2017, “goods transport agency” or GTA means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. This means, while others might also hire out vehicles for goods transportation, only those issuing a consignment note are considered as a GTA. Thus, a consignment note is an essential condition to be considered as a GTA.
Applicability of Reverse Charge Mechanism (RCM) on GTA Services
We know that GST is application of freight paid for the transportation of goods on reverse charge basis. But before we go into the detailed discussion lets list down few of the queries which come to our mind whenever there is the question of the applicability of RCM of GTA services:
1. Cases when RCM is applicable and applicable on freight for the transportation of goods and when it’s not applicable?
2. When GST is payable on freight for the transportation of goods on forward charge basis?
3. When GST is not applicable on freight charges?
Now to make the understanding of the subject, let’s us go through into the related provisions step by step. First of all, lets refer to the Notification No. 13/2017 of Central Tax (Rate) dated 28th June 2017 as amended from time to time which deals with the Reverse Charge Mechanism RCM). The item 1 of this notification states that the whole of GST leviable on under section 9 of CGST Act 2017, shall be paid on reverse charge basis by the recipient of supply of services by a goods transport agency (GTA) in respect of transportation of goods by road to:
1. any Factory registered under or governed by the Factories Act, 1948
2. any Registered Society
3. any Co-Operative Society established by or under any law; or
4. Any Company
5. any Partnership Firm.
6. Association of person.
7. any GST registered person.
So, if the GTA services are provided to person mentioned above (a-g), the recipient of the such DTA services would be liable pay GST on Reverse Charge basis. It’s to be noted that Individuals & HUF recipients are left out from the applicability of RCM unless they are registered under GST Act.
The rate of tax on such GTA Services under RCM basis would be 5%.
When the tax payable on GTA Services is under RCM basis, the supplier of such services is not eligible to avail any input tax credit in relation to the provision of such services and it had created a huge issue immediately after the roll out of GST in 2017. These suppliers themselves get a large amount of taxable supplies and also capital goods etc chargeable to GST at the rate as high as 28%. The goods transport industry representatives requested the government to allow GTA to charge GST on forward charge basis as well and on their representations the government issued the Notification No. 20/2017-Central Tax (Rate) 22nd August, 2017. This notification provides that if the goods transport agency opts to pay the tax on forwards charge basis then, such GTA would be liable to pay central tax @ 6% on all the services of GTA (including used household goods for personal use) supplied by it. So, the tax rate on GTA services on forward charges basis was fixed @12% (6% CGST & 6% SGST).
If GTA opts to charge tax on forward charges basis then the service provider & services recipient, both would be eligible to get the input tax credit.
Now let’s us go through into provisions related to GTA service when it would be exempt from any GST levy and for this, we have to refer to the Notification No. 12/2017 of Central Tax (Rate) dated 28th June 2017. The entry number 21 of this notification states that freight charges in India is would be exempt from GST for the followings:
1. Transport of agricultural produce
2. Transport of milk, salt, food grains including rice, flour, pulses
3. Transport of organic manure
4. Transport of newspapers or magazines registered with the Registrar of Newspapers
5. Transport of relief materials for victims of natural or man-made disasters, calamities, accidents or mishaps
6. Transport of defence or military equipment
7. Transport of any goods, where the gross amount charged for transportation for a consignment transported in a single carriage does not exceed Rs. 1,500.
8. Transport of any goods, where consideration charged for transportation of all such goods for a single consignee does not exceed Rs. 750.
One more exemption was allowed vide Notification No. 28/2018- Central Tax (Rate) (a) dated 31st December 2018 which states that freight charges in India is would be exempt from GST for the followings:
1. Department or Establishment of the Central Government or State Government or Union territory; or
2. local authority; or
3. Governmental agencies
which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under Section 51 and not for making a taxable supply of goods or services.
There are large number of business & organisation who either deals in exempt goods only or don’t have to get themselves registered. If such entities avail any GTA services where the amount consideration charged for transportation exceeds the limit of Rs. 1500/Rs.750 as the case may be, then such service recipients should try to avail services from GTA who charges GST under forward charge basis, otherwise they would be liable to get the GST registration and pay GST under RCM.
When GTA services on RCM basis is an inter-state supply and an intra state supply?
One very frequent query is that a taxpayer is liable to pay GST on GTA services on RCM basis, how should it treat such supply, inter-state or intra state i.e. What should the taxpayer charge under RCM CGST+SGST or IGST? For this we should know that ‘Place of Supply” for such services. To know this, we have to refer to Section 12 of IGST Act which says that the Place of Supply for services by way of transportation of goods, including by mail or courier would be as follows:
| Recipient | Place of Supply |
| Registered Person | Location of Registered Recipient |
| Unregistered Person | Location where such goods are handed over for the transportation |
Effective from 01st February 2019 an amendment has been brought in Section 12(8) of IGST Act 2017 and the amendment has inserted the following proviso:
Provided that where the transportation of goods is to a place outside India, the place of supply shall be the place of destination of such goods.
We can understand the above with few simple examples given below.
Example 1- Satyam Electronics registered in Delhi hires ABC Carriers, a goods transportation company based in Delhi for the transportation of goods.
Place of supply: Delhi (the location of registered person)
GST Applicable under RCM: CGST+ SGST (intra-state)
Example 2- Satyam Electronics registered in Delhi hires ABC Carriers, a goods transportation company based in Mumbai for the transportation of goods.
Place of supply: Delhi (the location of registered person)
GST Applicable under RCM: IGST (inter-state)
Example 3: Amit on his transfer from Chennai to Delhi, handed over his household items to ABC Carriers, a goods transportation company based in Chennai to transfer such materials to Delhi.
Place of supply: Chennai (Location at which such goods are handed over for their transportation)
GST Applicable under RCM: CGST+SGST.
Example 4: A registered person M/s ABC Limited in India during the export of goods to Bangladesh has entered into a contract with a GTA located in India to transport goods by road.
Place of Supply: Post the amendment to Section 12(8) of IGST Act, the place of supply for service provided by the GTA shall be the destination of goods i.e. Bangladesh and not the location of M/s ABC Limited or the location of the supplier of M/s ABC Limited in India.
Accordingly, because the place of supply of service is outside India and supplier is located in India, it shall be treated to be a supply in the course of inter-state trade or commerce [Section 7(5)(a) of IGST Act].
Author Bio
dear sir,
I wanted to ask that exemption relating to GTA i.e.1500/750 are still valid, or there is any amendment relating to it?
is RCM applicable in Porter service of corporate company?
Dear sir one of supplier is engaged in supply of taxable and exempted goods. during the year 2020-21 the supplier availed the GTA service. The question is whether RCM is paid on which the goods purchase is nil rated or exempted categories or if the receipent of goods paid rcm and take the ITC and credited into credit ledger. Then the receipent of goods reversed the itc taken on RCM
Please give the suggestion
Sir,
Please let me know What will be apply RCM if GTA provide service to a GTA.
Hii
Clarification regarding on RCM
If i am a seller and made sales invoice to other party and charged Transportation charges in my Sales invoice with tax Rate which is applicable on goods.
but second part is Transporter has issued LR to me is i have to Pay RCM on that amount
sir,
we in andhra received goods from gujarat state and tranporter also from gujarat . both supplier and transporters are registered persons. rcm under which head to pay IGST OR C/SGST
We are GST Registered dealer in Maharashtra. We received goods from Gujrat supplier & transporter is Registered GTA, we pay the freight Rs. 10000/-in Maharashtra on receipt of Goods. . The GTA mentioned to pay RCM – on consignment LR. Supplier, GTA,,Buyer all are registered. In auto generated 3B it reveals to pay IGST. Whether we have to pay RCM as IGST or CGST & SGST . Please guide.
in purchase bill the consignor shows transportation self, and we are paying the same in cash transaction against such bill,
so how we take RCM input and what is the base document for RCM on freight??
GST on freight charges for forwarding services
Freight forwarding and logistics services, including movement of the goods by any mode of transport, would be treated as the
supply of services
. The applicability of GST on freight forwarding or logisticsservices would depend on whether such transportation is domestic or international. i am a Pvt.Ltd. Co.And Work As CFA A LTD.Co. If I Have Received Transport Service through GST Registered Transport Agency and the Agency give me a bill but not charge GST on that. Should I pay RCM on Freight?
Pls let me know whether the recipient is liable to pay interest on RCM if the accounting is done above 60 days from the date of invoice or from the date of service completion.
Our company is located in Ahmedabad ,Gujarathaving Gujarat GST. We use various transport operators to send material to different consignees all over India. R we required to pay Local GST or IGST ? What is the determining factor ?
Dear Sir,
We are getting GST 12% Bill from transporters and taking ITC what we have paid 12%.
Other transporters are not charging GST, we are paying on RCM Basis 5% and taking ITC, It is correct, please reply me sir
Hello Sir,
I have (Company) a purchase some materials from a registered dealer (GST) and in invoice there is transportation cost charged by Seller but without showing the GST amount, and transport service taken by 3rd party. what’s the GST liability in case of Seller & Buyer.
Dear Sir,
1. What is the exempt limit of RCM on GTA?
2. If I hire a Truck from Market and not from any Transport Agency and pay freight in cash should I pay RCM on freight.?
3. If I book a consignment from Delhi through GST registered Transport and the Transport issue a bill without GST should I pay the RCM on freight.?
Dear Sir,
1. What is the exempt limit of RCM on GTA
2. If I hire Truck from market not from any Transport Agency and pay freight in cash should I pay the RCM on Freight ?
3. If I book a consignment from Delhi through GST Registered Transport Agency and the Agency give me a bill but not charge GST on that. Should I pay RCM on Freight?
Outside transport expenses application for RCM tax ?
Transporter issued us Invoice under RCM that GST payable by party and we pay 5% GST on there invoices under RCM. I Need to know that can we claim GST input on which we deposit behalf of the transporter.
We are Gujarat based Pvt Ltd Co. and we receive Taxable Goods by Unregistered person (GTA) of Uttar Pradesh. who lives in Gujarat. Goods are picked-up from Gujarat and Supplied within Gujarat.
In such case, whether RCM applied as I GST or C / S GST…?
We are selling goods including freight, hence GST is charged on Freight also in Sale Invoice and accordingly shown in GSTR-1 returns.
Whether still RCM is applicable when the freight collected in Invoice is reimbursed to Transporter.
I am paying RCM on freight charges and further adjusting this against my output liability. The rate is adopted 5 %. Is this correct ? or rate should be 12 %. I am confused on this.
Dear sir,
Ours is a project construction co, we registered in all states for get in India. Our office at Delhi, we instruct transport to lift material from Assam to Vizag AP . Transporter also have office all over India. Transporter bills from Delhi office to my Delhi office. While my customer billing is local (AP to Ap) query 1 is this bill booked in Delhi or it booked in AP & for local or interstate in both condition pl clearfy .
S k bhardwaj
Chartered accountant
If GTA services is rendered to a person located outside India for transportation of goods from custom port to some other place, how the service provider will be liable. The considerations are received in convertible foreign exchange.
My transporter is Public Limited Company, do I need to Pay GST on RCM basis ?
I AM A GTA AND REGISTERED UNDER GST. SO HOW TO I FILE MY GSTR-1
Dear Sir,
My Q. realated to RCM
Transport from Mumbai & Service place Gujarat should i pay igst ? CGST / SGST ?
We are a Pvt.Ltd. company and receives services from registered GTA. We paid GST @5% under RCM. Are we legible for input credit of this RCM….?
i am registered dealer and I have taken service of transportation, the Transporter also registered dealer.
They charged me GST 5% which is showing in my 2A also.
Can I pay 12% tax and take ITC on it.
I also have the same querry. Nowhere it is mentioned what would be if GTA charge 5% through invice what would the receipts duty after that .
If you conclude with this please reply me .
Mr. Alokji
If A GTA (GTA-2- registered) provide services to another GTA (GTA-1 unregistered ) for Transporting Goods of GTA-1’s customer. GTA-2 has issued bill to GTA-1 as Tranportation and written “GST to be paid under RCM by the Receipient” , (both consignor and consignee are registered under GST,) Please clarify for GTA 2 ‘s GSTR1 ?
A GTA (GTA-2- registered) provide services to another GTA (GTA-1 unregistered ) for Transporting Goods of GTA-1’s customer. GTA-2 has issued bill to GTA-1 as Tranportation and written “GST to be paid under RCM by the Receipient” , (both consignor and consignee are registered under GST,) Please clarify for GTA 2 ‘s GSTR1 ?
The Reg supplier books a lorry via lorry supply office(Broker office), the lorry driver cum owner pays some commission to broker as he arranged the deal. Now he bring the goods to Reg Recipient and collects freight amount. Whether broker fits as GTA, and does this transaction falls under RCM.
Sir,
we only get Inward and outward transports Service, and paid monthly GTA amount, and we are in inverted duty structure, so can we refunded Paid GTA amount ? if yes how ? please guide for their rule or notifications.
service
R/Sir,
I am a GTA provides services to Government departments. whether under RCM, the recipient will deduct the GST amount from my freight bills to pay GST which the recipient is liable to pay under RCM
For example, a GTA (GTA-2) receiving services from another GTA (GTA-1) for Transporting Goods of GTA-2’s customer. GTA-1 has issued bill to GTA-2 as Tranportation and written “GST to be paid under RCM by the Receipient” and also GTA-2 has issued to the end customer mentioning the RCM to paid by Receipient.
Should GTA-2 also pay under RCM. Please clarify
IF REGISTERED CONSIGNOR IS PAYING THE FREIGHT CHARGES TO REGISTERED GTA THEN IN GSTR-1 RETURN FILED BY GTA WHOSE NAME TO SHOW AS RECEIVER OF SERVICES
I m a Trader of Coal Business (Registered). But I m collecting coal from other state through Transporter.
Transporter (Registered) issued bill separately us with GST. Can I taken input ?
Inter State Supply by unregistered GTA was exempt till 31/03/2018 through Notification No .32/2017 IGST. Whether it is exempted till today or that Notification rescind.
Hi Alok Ji,
If Gst paid on RCM basis on GTA, whether its credit will be avilable and when?
What will be above scenario in case of GTA services used for supplying tax free goods?
WHAT WILL BE , IF GTA SERVICE PROVIDER CHARGES GST ON ITS BILL …very confusing
i am complete MBA Finance -Accountant workin in 10YRS