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GST on Transport Charges (GTA)

The current article tries to clear the picture of the applicability of GST on transport charges (i.e. GTA).

Exemption available to transportation of goods by road vis-à-vis GTA services-

As per serial no. 18 to Notification no. 12/2017- Central Tax (Rate) dated 28th June 2017, GST is exempt in case of services by way of transportation of goods by road. However, the exemption is not available to the following services-

  • Goods are transported by a goods transport agency; and
  • Goods are transported by a courier agency. 

In nut-shell, goods transported through GTA is taxable under GST.

Meaning of the term ‘Goods Transport Agency’ and ‘consignment note’-

Notification no. 11/2017- Central Tax (Rate) dated 28th June 2017 covers the definition of the term ‘Goods Transport Agency’ (GTA). Accordingly, GTA means as under-

  • A person who provides service in relation to goods transport by road; and
  • Issues consignment note (by whatever name called).

As seen above, ‘Consignment note’ is a document issued by a GTA against receipt of the goods for the purpose of transporting in a goods carriage. A consignment note is serially numbered and contains some of the following basic details-

  • Name of the consignor;
  • Name of the consignee;
  • Registration number of the carriage of the goods;
  • Place of origin;
  • Details of the goods;
  • Place of destination.

Rate of GST payable on transport charges-

The rates of GST applicable to GTA services is amended and prescribed under Notification no. 20/2017- Central Tax (Rate) dated 22nd August 2017. Accordingly, GST rates are as under-

GST Rates

Conditions

5% (2.5% CGST and 2.5% SGST)

Input tax credit charged on goods/ services used for supplying GTA service is not available.

12% (6% CGST and 6% SGST)

GTA opting to pay a central tax of 6% will be liable to pay a central tax of 6% on all the services of GTA supplied by it.

Applicability of reverse charge mechanism (RCM)-

Notification no. 13/2017- Central Tax (Rate) dated 28th June 2017 notifies the services on which tax is payable by the service receiver on a reverse charge basis.

Accordingly, reverse charge mechanism will be applicable under Goods Transport Agency service in case all the following conditions are satisfied-

Condition 1 – Service provider is a Goods Transport Agency who has not paid central tax @6%; and

Condition 2 – Service receiver is any of the following person-

  • A factory (registered under the Factories Act, 1948),
  • A co-operative society,
  • A society (registered under the Society Registration Act, 1860 or under any other law),
  • A person registered under GST under any of the following Act-
    • Central Goods and Services Tax Act;
    • Integrated Goods and Services Tax Act;
    • State Goods and Services Tax Act;
    • Union Territory Goods and Services Tax Act.
  • A body corporate,
  • A partnership firm (including an association of person), or
  • A casual taxable person.

Condition 3 – The specified service receiver (as per the list above) is located in taxable territory.

In the case of a supply of goods, depending upon the terms, the transportation cost is borne by either the supplier of goods (i.e., consignor) or the receiver of goods (i.e., consignee). Accordingly, a basic question will arise that who will be liable (i.e., consignor or consignee) to pay GST on transportation charges on a reverse charge basis?

Answer to the same is simplified hereunder-

Particulars

Person liable to pay GST on reverse charge basis

When transportation cost is borne by the consignor (i.e., consignor makes the payment to GTA)

The consignor will be treated as a service receiver. Accordingly, in case the consignor is one of the specified service receivers (as listed above), then the consignor will be liable to pay GST on transportation charges.

When transportation cost is borne by the consignee (i.e., consignee makes the payment to GTA)

The consignee will be treated as service receiver. Accordingly, in case the consignee is one of the specified service receivers (as listed above), then the consignee will be liable to pay GST on transportation charges.

Availability of Input Tax Credit on GST paid on transportation charges-

Input Tax Credit in respect of GST paid on transportation charges will be as under-

Particulars

Availability of input tax credit

When tax is paid by GTA @5%

Input Tax Credit not available

When tax is paid by GTA @12%

Input Tax Credit available

When tax is paid by the service receiver under reverse charge mechanism

Input Tax Credit is available provided the service is used in the course or furtherance of the business.

GST registration requirement for GTA-

Due to the applicability of both reverse charge and forward charge to the GTA services, the GST registration requirement for GTA has always been confusing.

To clear up the said confusion, let us refer to Notification no. 5/2017- Central Tax dated 19th June 2017. The said notification clearly states that if the person is engaged only in supplying taxable goods/ services on which tax is payable by the service receiver under reverse charge mechanism. Then, such a person is exempted from obtaining GST registration. 

Accordingly, GTA will not be liable to obtain GST registration if he is exclusively engaged in goods transportation service on which service receiver is liable to pay tax under reverse charge mechanism.

List of exempted services-

The following list of services provided by a GTA is exempt from GST-

  • Transport of agricultural produce,
  • Transport of goods, wherein, the gross amount charged for transportation for a consignment transported in a single carriage doesn’t exceed INR 1500,
  • Transport of goods, where, the consideration charged for transportation of all such goods for a single consignee doesn’t exceed INR 750,
  • Transport of goods like-    
    • Milk,
    • Salt,
    • Food grain,
    • Flour,
    • Pulse,
    • Rice,
    • Organic manure,
    • Newspaper or magazines which are registered with the registrar of newspapers,
    • Relief material for victims of man-made or natural disasters/ accidents/ calamities/ mishaps,
    • Defense/ military equipment.
  • Transport of goods to following person registered under CGST as TDS deductor-
    • A department/ establishment of the Central or State Government or Union territory,
    • Local authority,
    • Governmental agencies. 

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Author:

CA Poonam Gandhi


Jul 7, 2021

Comments


Well explained. It has missed out to address what is the correct SAC code for GTA services (by road( in details. Because lot of people has confuse whether it should be under 996511 or 996791 ?
By: Raman | Dt: Jul 8, 2021


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