Goods Transport Agency Services under GST
Taxation of services provided by Goods Transport Agency (‘GTA’) operators has always been an ambiguous issue under indirect tax statutes. Under the GST regime, services of transportation of goods by road supplied by a GTA are taxable, similar to the erstwhile service tax regime.
What is Goods Transport Agency (GTA)
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.
Although GST Act does not provide definition of GTA, notification 12/2017 dt.28-07-2017 CT(Rate) under para 2(ze) states GTA as follows:
“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”
Hence based on above definition, there are two condition which needs to be satisfied to classify any person as GTA:
- Any service provider rendering transportation of goods services through Road And
- Issues Consignment note
Issuance of consignment note or similar documents (contract of carriage, goods receipt note etc.) by the supplier, therefore seems to be the critical factor for coming within the ambit of GTA services. Where the supplier does not issue a consignment note or similar document, the services do not qualify as GTA services, and hence should not be taxable.
This point has also been clarified by the CBIC in the FAQs issued for the transport sector. The extract of which is given as follows:
“Thus, it can be seen that issuance of a consignment note is the sine-qua-non 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 (‘GTA’). It is only the services of such GTA, who assumes agency functions, that is being brought into the GST net. Individual truck/tempo operators who do not issue any consignment note are not covered within the meaning of the term GTA. As a corollary, the services provided by such individual transporters who do not issue a consignment note will be covered by the entry at s.no.18 of notification no.12/2017-Central Tax (Rate), which is exempt from GST.”
What is Consignment Note:
Consignment Note is neither defined in the GST Act nor in the Notification no.12/2017-Central Tax (Rate). Guidance can be taken from the definition provided in the 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’.
Therefore, individual tempo operator / Truck operator, who do not issue consignment note are not covered within the meaning of GTA and since they are not covered within definition of GTA, such services will be exempted as per Entry 18 of Notification No. 12/2017-CT(Rate).
The significance of the term “In relation to” in the definition of GTA
The use of the phrase ‘in relation to’ has extended the scope of the definition of GTA. This actually means that GTA includes not only the actual transportation of goods but any intermediate/ancillary service provided in relation to such transportation like:
|•||Loading / unloading,|
|•||Packing / unpacking,|
|•||Temporary warehousing, etc.|
If these services are not provided as independent activities but are the means for successful provision of GTA Service, then they are also covered under GTA.
Person Liable to Pay GST on GTA services
The liability to pay GST devolves on the recipients for supply of services by a goods transport agency (GTA) who has not paid central tax at the rate of 6%, in respect of transportation of goods by road (in terms of notification no. 13/2017-Central Tax (Rate) dated 28.06.2017 (sr.no.1) as amended by notification no. 22/2017-Central Tax (Rate) dated 22.08.2017, if the recipients (located in the taxable territory) belong to the following categories:
- any Factory registered under or governed by the Factories Act, 1948
- 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
- any co-operative society established by or under any law; or
- any person registered under CGST Act, IGST Act, SGST Act or UTGST Act; or
- any body corporate established, by or under any law; or
- any partnership firm whether registered or not under any law including association of persons; or
- any casual taxable person; located in the taxable territory.
Therefore based on above it can be concluded that if the GTA services are provided to person mentioned above (a-g), the recipient of the such GTA services would be liable pay GST on Reverse Charge basis. It is to be noted that Individuals & HUF recipients are left out from the applicability of RCM unless they are registered under GST Act and rate of tax on such GTA services would be 5% and supplier of GTA service is not eligible to avail any ITC in relation to the provision of such services.
Further, If services provided by GTA doesn’t fall under RCM, then GTA can opt any option out of two options as provided through N/N 20/2017-CT(R) which are as follows:
- Pay taxes at 5% without claiming ITC on inward supplies
- Pay taxes at 12% and can claim ITC on inward supplies
Example : Mr. X, who is an individual tempo operator provides transportation of goods services without issue of consignment note to M/s. XYZ Ltd, such transporter would be covered by the entry at Entry 18 of Notification No. 12/2017-CT (Rate), which is exempt from GST.
In above example, if Mr. A would have issued consignment note then, he would have fallen under the category of GTA and GST would have been paid either by Mr. A or XYZ Ltd under Reverse charge mechanism ( in case if Mr. A decide not to pay CGST @ 6% & SGST @ 6% or IGST @ 12%)
POS in case of GTA Service:
As per Sec 12(8) of IGST Act 2017, The place of supply of services by way of transportation of goods, including by mail or courier to-
- A registered person, shall be location of such person;
- a person other than a registered person, shall be the location at which such goods are handed over for their transportation
GTA Services specifically exempt:
In terms of Notification No. 12/2017 CT(R) dated 28.06.2017 the following services provided by GTA is exempt from Payment of GST:
- The entry number 21 of this notification states that freight charges in India would be exempt from GST for the following:
- Transport of agricultural produce
- Transport of any goods, where the gross amount charged for transportation for a consignment transported in a single carriage does not exceed Rs. 1500
- Transport of any goods, where consideration charged for transportation of all such goods for a single consignee does not exceed Rs. 750
- Transport of milk, salt, food grains including rice, flour, pulses
- Transport of organic manure
- Transport of newspapers or magazines registered with the Registrar of Newspapers
- Transport of relief materials for victims of natural or man-made disasters, calamities, accidents or mishaps
- Transport of defence or military equipment.
- Services provided by a GTA to an unregistered person, including an unregistered casual taxable person, other than the following recipients, namely-
- any factory registered under or governed by the Factories Act, 1948 (63 of 1948); or
- 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
- any Co-operative Society established by or under any law for the time being in force; or
- any body corporate established, by or under any law for the time being in force; or
- any partnership firm whether registered or not under any law including association of persons;
- 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.
- 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 would be exempt from GST for the following:
- Department or Establishment of the Central Government or State Government or Union territory; or
- local authority; or
- 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
- Also entry no. 22 of N/N 12/2017-CT(R) also exempts service by way of hire to a GTA, a means of transportation of goods.
As per the above provisions it can be concluded that not all transport of goods by road is by a GTA. To qualify as services of GTA, the GTA should be necessarily issuing a consignment note. 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 provider is the person liable to pay GST. The GTA service provider is not entitled to take ITC on input services availed by him if tax is being charged @ 5% (2.5% CGST + 2.5% SGST).
In case the GTA service supplier hires any means of transport to provide his output service, no GST is payable on such inputs.
In a nutshell, the GST law continues the provisions prevailing under the Service Tax regime. The law recognizes that pure transportation of goods services are mostly provided by persons in the unorganized sector and hence has specifically excluded such operators from the tax net. In respect of those who provide agency services in transport, the liability is cast on the recipients in most of the cases or unless option to pay under forward charge has been exercised by the GTA.