Supply of Service by Goods Transport Agency (GTA) – Detailed Analysis

This article contains all aspects related to Supply of Service by Goods Transport Agency (GTA) and explains what is GTA, tax payable on forward charge basis as well as on reverse charge basis, exempt service with FAQs.

GST is a labyrinth. To understand any particular subject of GST one needs to refer all sections of GST such as Act, Rules, Notifications, Circulars and FAQ etc.. Nothing is available at one platform under GST. If someone reads the notification of a particular date and feels he got the answer after reading, but there might be a chances that the said notification has been amended or modified by any further notification. Likewise, circular after circular have been issued to clarify many subjects in GST. Further FAQs are also issued to clarify the Act, Rules, Notifications etc.. That’s why I say GST is a labyrinth.

The law on supply of service by GTA for transportation of goods by road is a puzzle. This service is taxable on the basis of forward charge as well as taxable on the basis of reverse charge. It is taxable at the rate of five percent as well as at the rate of twelve percent and it is also exempt from tax. The Supplier GTA can avail input tax credit on supply of service as well as not eligible to avail input tax credit. This article discusses all such possible aspects impacting supply of service by GTA for transport of goods by road.

Q 1. What is a GTA ( Goods Transport Agency )?

The definition of GTA ( Goods Transport Agency ) according to clause (ze) of the NOTIFICATION NO. 12/2017-CENTRAL TAX (RATE) dated 28-06-2017 is “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.

Two Conditions must be fulfilled to come under the definition of the GTA:–

1. The Person shall provide service in relation to transport of goods by road and

2. The Person shall issue consignment note.

The GST Law says only for that GTA who provides service for transport of goods by road only. If the person provides service of transport of goods by rail or by air that person shall not come under the purview of the GTA under the GST Law.

The second condition that the person shall issue the consignment note. The definition says that the note name as issued by the person may be the name other than the name as consignment note. The definition of the “consignment note” is not available under the GST Law. But definition of the note is available under the erstwhile law of service tax which is reproduced “Explanation to Rule 4B of Service Tax Rules, 1994. In terms of the said rule, consignment note means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the goods transport agency.”

According to dictionary meaning “consignment note is a document that shows the details of goods that have been sent from a seller to a buyer, and that travels with the goods.”

It is like a “bill of lading” used for inland transport.

Q 2. Goods Transport Services by Road but no any Consignment Note Issued.

Ans: If the transporter provides service for transport of goods by road but no any consignment note is issued by the transporter then such service shall not be treated as service provided by the GTA. Under the GST Law such services are exempt from payment of tax vide NOTIFICATION NO. 12/2017-CENTRAL TAX (RATE) dated 28-06-2017. This exemption is available at serial no. 18 heading 9965 of the said notification which is reproduced as under:

Services by way of transportation of goods—

(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.

Q 3. Rate of Tax for Service supplied by GTA in relation to transport of goods by road. 

Ans: NOTIFICATION NO. 11/2017-CENTRAL TAX (RATE) dated 28-06-2017

S.No.of Notification	Heading	Service	Rate of Tax in percent	Condition of ITC
9	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	( without ITC )-Provided that credit of input tax charged on goods and services used in supplying the service has not been taken
9	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	( with ITC )- 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.
11	Heading 9967 (Supporting services in transport)	(i) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use).	2.5	( without ITC )-Provided that credit of input tax charged on goods and services used in supplying the service has not been taken
11	Heading 9967 (Supporting services in transport)	(i) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use).	6	( with ITC )- 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.

Notes- 1. Once the Supplier GTA opts to pay central tax @ 6% thereafter he shall be liable to pay central tax with same rate i.e. 6%.

2. A GTA can avail input tax credit proportionately towards supplies made other than supply of service for transport of goods by road. An Explanation iv to the said notification in this regard has been provided which is reproduced as under:

“Wherever a rate has been prescribed in this notification subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been taken, it shall mean that,—

(a)   credit of input tax charged on goods or services used exclusively in supplying such service has not been taken; and

(b)   credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for input tax credits, is reversed as if supply of such service is an exempt supply and attracts provisions of sub-section (2) of section 17 of the Central Goods and Services Tax Act, 2017 and the rules made thereunder.”

Q 4. Exempt Services provided by the GTA for transport of goods by road –

Ans: NOTIFICATION NO. 12/2017-CENTRAL TAX (RATE) dated 28-06-2017

S.No.of Notification	Heading	Service
21	Heading 9965 or Heading 9967	Services provided by a goods transport agency, by way of transport in a goods carriage of— (a)  agricultural produce; (b)  goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees; (c)  goods, where consideration charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred and fifty; (d)  milk, salt and food grain including flour, pulses and rice; (e)  organic manure; (f)  newspaper or magazines registered with the Registrar of Newspapers; (g)  relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or (h)  defence or military equipments.
21A	Heading 9965 or Heading 9967	Services provided by a goods transport agency to an unregistered person, including an unregistered casual taxable person, other than the following recipients, namely:— (a)  any factory registered under or governed by the Factories Act, 1948 (63 of 1948); or (b)  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 (c)  any Co-operative Society established by or under any law for the time being in force; or (d)  any body corporate established, by or under any law for the time being in force; or (e)  any partnership firm whether registered or not under any law including association of persons; (f)  any casual taxable 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.
21B	Heading 9965 or Heading 9967	Services provided by a goods transport agency, by way of transport of goods in a goods carriage, to,— (a)  a Department or Establishment of the Central Government or State Government or Union territory; or (b)  local authority; or (c)  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.

Q 5. Exempt Services Provided to the GTA –

Ans: NOTIFICATION NO. 12/2017-CENTRAL TAX (RATE) dated 28-06-2017

S.No.of Notification	Heading	Service
22	Heading 9966 or Heading 9973	Services by way of giving on hire— (b)  to a goods transport agency, a means of transportation of goods

Q 6. Reverse Charge Mechanism for supply of service by a GTA –

Ans: The Legislature has notified, at S.No.1 of the NOTIFICATION NO. 13/2017-CENTRAL TAX (RATE) dated 28-06-2017, supply of service by a GTA on which the tax shall be paid on reverse charge basis by the specified recipient. This notification has been issued under section 9 (3) of the CGST Act.

The conditions for such supply of service to fall under the RCM scheme are as under:

1. Supply of service by a GTA, on which the GTA has not paid central tax at the rate of 6 percent, shall fall under the RCM scheme. Meaning thereby that supply of service of that GTA, who has opted to pay central tax @ 6 percent, shall not be covered under RCM scheme.

2. Supply of service by a GTA in respect of transportation of goods by road must have to be made to any one of the following specified recipients. If such supply of service is made to the recipient other than the specified recipient, then such supply of service shall not be eligible for the RCM scheme. List of Recipients to whom such supply of service to be made for the purpose of RCM scheme is as under:

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

(b)  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

(c)  any co-operative society established by or under any law; or

(d)  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

(e)  any body corporate established, by or under any law; or

(f)  any partnership firm whether registered or not under any law including association of persons; or

(g)  any casual taxable person; located in the taxable territory.

• Rate of tax to be paid by the Recipient on such supply of service on the basis of reverse charge shall be 2.5 percent each under CGST and SGST or 5 percent IGST according to the nature of supply.
• It is immaterial from whom such supply of service received either from the registered GTA or from the unregistered GTA, the Recipient shall have to pay tax on the basis of reverse charge because such supply of service has been notified under section 9 (3) of the CGST Act.

Q 7. FAQ by the GST Department – 

S.No.	Question	Answer
1	I am a single truck owner-operator and I ply my truck mostly between States, carrying the goods booked for my truck by an agent; aggregate value of service which I provided exceeded twenty lakh rupees during last year. Am I supposed to take registration?	You are not liable to registration, as services provided by way of transportation of goods by road are exempt. Notification number 12/2017-Central Tax (Rate), dated 28th June, 2017 refers.
2	I own a single truck and I rent it to a major player, who provides GTA service; should I take a registration? Does my monthly rental/lease income attract GST?	Registration is not required since services by way of giving on hire, a means of transportation of goods to a GTA are exempt from tax vide entry no. 22 of Notification number 12/2017-Central Tax (Rate) dated 28th June, 2017.
3	In my truck, I only carry fruits and vegetables, in relation to whose transportation service GST is exempt; should I take registration?	Services by way of transportation of goods by road other than by a GTA or a courier agency are exempt from tax under entry no. 18 of notification No. 12/2017-Central Tax (Rate) dated the 28th June, 2017 and thus you are not liable for registration.
4	I am a truck supplier/broker. My job is to get orders for truck owners. I quote the rate for transportation to GTA on behalf of truck owners and I get a small amount as commission out of the truck hire fixed with the GTA. This brokerage is paid by the truck owners. As the services provided by way of transportation of goods by road are exempt from tax, am I liable to registration?	You are liable to registration if the aggregate amount of commission received by you in a financial year exceeds Rs. 20 lakhs (Rs. 10 lakhs in special category States except J & K).
5	As a transporter, am I required to maintain any records of my services of transportation?	Yes, in terms of section 35(2) of the CGST Act, 2017 you are required to maintain records of the consigner, consignee and other relevant details of the goods. Further, in terms of rule 56 of the CGST Rules, 2017 you are required to maintain records of goods transported, delivered and goods stored in transit by you along with the GSTIN of the registered consigner and consignee for each of your branches.
6	Are intermediary and ancillary services, such as, loading/unloading, packing/unpacking, transhipment and temporary warehousing, provided in relation to transportation of goods by road to be treated as part of the GTA service, being a composite supply, or these services are to be treated as separate supplies.	The GTA provides service to a person in relation to transportation of goods by road in a goods carriage, which is a composite service. The composite service may include various intermediary and ancillary services, such as, loading/unloading, packing/unpacking, transhipment and temporary warehousing, which are provided in the course of transport of goods by road. These services are not provided as independent services but as ancillary to the principal service, namely, transportation of goods by road. The invoice issued by the GTA for providing the said service includes the value of intermediary and ancillary services. In view of this, if any intermediary and ancillary service is provided in relation to transportation of goods by road, and charges, if any, for such services are included in the invoice issued by the GTA, such service would form part of the GTA service and would not be treated as a separate supply. In fact, any service provided along with the GTA service that is part of the composite service of GTA shall be taxed along with GTA service and not as separate supplies. However, if such incidental services are provided as separate services and charged separately, whether in the same invoice or separate invoices, they shall be treated as separate supplies.
7	As per Notification number 05/2017-Central Tax dated 19th June, 2017, the persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under sub-section (3) of section 9 of the CGST Act, 2017 are exempted from obtaining registration under the said Act. Please clarify whether a GTA providing service in relation to transportation of goods by road under reverse charge mechanism (RCM) can avail of the benefit of this exemption.	Yes, a GTA providing service in relation to transportation of goods by road under RCM can avail of the benefit of this exemption.
8	Can a GTA obtain registration for one vertical (Rail, Cargo, Renting, Warehousing etc.) for which tax needs to be paid while not obtaining registration for another vertical (GTA under RCM) on which there is no tax liability.	No, because the business entity is not engaged exclusively in the supply of services liable to tax under reverse charge mechanism.
9	In transport industry, old vehicles, old tyres, scrap material etc, on which no input tax credit (ITC) has been taken, are disposed of after completion of their useful life. As a truck owner disposing of these goods, am I required to pay GST considering that no ITC has been taken at the time of their initial purchases? Would levy of tax in such cases not amount to double taxation, as tax has already been paid at the time of initial purchases?	Under section 7 of the CGST Act, 2017 supply includes all forms of supply of goods such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Sale or disposal of old vehicles, old tyres and scrap material for a consideration would therefore attract GST regardless of whether ITC has been availed or not
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.	Yes, input tax credit is available in such cases.
11	When a GTA hires a truck (with driver) from another GST registered entity for the purpose of providing goods transport service to a registered recipient, whether tax credit is available to the GTA on the GST paid by him to the owner of the truck registered under GST.	Services by way of giving on hire to a GTA, a means of transportation of goods are exempt from GST under Notification number 12/2017-Central Tax (Rate) dated 28th June 2017. When the tax is not payable, the question of taking any tax credit does not arise.

8. Conclusion

• Service of Transport of Goods by road is exempt service until such service is provided by Goods Transport Agency (GTA).
• GTA shall have to issue consignment note mandatory at the time of providing such service. If GTA provides such service without issuing consignment note then such service shall not be treated as service provided by GTA.
• GTA shall pay tax on the basis of forward charge if he opts to pay central tax @ 6 per cent.
• GTA shall pay central tax @ 2.5 percent on the basis of forward charge if he makes supply to any recipient other than the specified recipient as notified at s.no.1 of the Notification No. 13/2017- Central Tax (Rate) dated 28-06-2017 for the purpose of reverse charge.
• Central tax @ 2.5 percent shall be paid on the basis of reverse chargeon such service by the specified recipient as notified at s.no.1 of the Notification No. 13/2017- Central Tax (Rate) dated 28-06-2017 for the purpose of reverse charge.
• Reverse Charge Mechanismshall not be applied on supply of service of transportation of goods by road by a GTA who has opted to pay central tax @ 6 percent.
• GTA shall be eligible to avail input tax creditif he opts to pay central tax @ 6 percent. If he pays central tax @ 2.5 percent then he shall not be eligible to avail input tax credit.
• Supply of service by a GTA shall be treated as exempt serviceif such service has been notified in S.No.21, 21A and 21B of the Notification No. 12/2017- Central Tax (Rate) dated 28-06-2017.
• Intermediate/ancillary service provided in relation to such transportation, like loading/unloading, packing/unpacking, trans-shipment, temporary warehousing, etc.. shall also covered under service provided by a GTA if these services are not provided as independent activities but are the means for successful provision of GTA Service.

To reach to me for any suggestions, rectifications, amendments and/or further clarifications in regard of this article my email address is pkmgstupdate@gmail.com.