In this article you will learn:
- Transportation of Goods by Road
- What is a Goods Transport Agency (GTA)?
- What is a Consignment Note?
- Services Provided by a GTA
- GST on GTA Services
- Eligibility of Input Tax Credit
- Rate of GST on GTA
- Registration of a GTA
- Reverse Charge Under GTA
- Who Will Pay GST Under RCM?
- Place of Supply In GTA
- Accounts & Records By GTA
- Generation of E-Way Bill
Road transporters have been retaliating levy of tax on road transportation service ever since the government charged service tax on goods transport operators. As a consequence, service tax levied on the services of transportation of goods by road were exempted under the service tax regime.
Such a provision is being continued even under the GST regime. Accordingly, the services of transportation of goods by road, except services of GTA, continue to be exempt under the GST regime.
However, there are cases where services rendered by a GTA are chargeable to tax.
This article talks about GST on transport, Goods Transport Agency (GTA) and the various provisions that are applicable to a GTA under GST.
So let’s first understand how transportation of goods by road takes place.[/vc_column_text]
Transportation of Goods by Road
Transportation of goods by road is done either by a transporter or by a courier agency. In this article we will talk about transportation of goods by road done by a transporter. Now, a transporter can be of two types:
- a Goods Transport Agency (GTA)
- transport owners (vehicle owners)
The difference between a GTA and transport owners is that a GTA is a service provider that provides service of transportation of goods through a fleet of vehicles provided by others. Whereas, transport owners are the ones who are the owners of the fleet of vehicles.
It is important to distinguish between a GTA and a transport owner because of the exemption provided on the services by way of transportation of goods. Accordingly, the following set of services are exempt from GST.
Services by the way of transportation of goods (Heading 9965):
- by road except the services of
- a GTA
- a courier agency
- by inland waterways
This means mere transportation of goods by road unless done by a GTA is exempt from GST.
What is a Goods Transport Agency (GTA)?
As per section 2 (ze) of the Notification No. 12/2017 dated 28th June, 2017, a ‘GTA means any person who provides service in relation to transport of goods by road and issues a consignment note by whatever name called.’
It is important to note that the issuance of a consignment note by a road transporter is a mandatory requirement before bringing such a transporter under the ambit of a GTA.
This means that if a transporter does not issue the consignment note, the service provider will not come within the ambit of GTA. However, if a transporter issues a consignment note, it indicates that the lien of goods has been transferred to the transporter.
Hence, such a transporter becomes responsible for the goods till such goods are delivered to the consignee.
In other words, only the services rendered by such a GTA who assumes agency functions are brought under the GST net. Whereas the individual truck or tempo operators who do not issue any consignment note are not covered within GTA.
This is to say that services provided by such individual transporters who do not issue a consignment note would be exempt from GST.
What is a Consignment Note?
Consignment note is a document issued by a GTA on receiving goods for the purpose of transporting such goods by road in a goods carriage. Such a consignment note has the following set of details:
- Name of the consignor
- Name of the consignee
- Registration number of the goods carriage in which goods are transported
- Serial number
- Details of goods transported
- Place of origin
- Place of destination
- Person liable for paying tax that is consignor, consignee or GTA
Services Provided by a GTA
A GTA not only provides services pertaining to actual transportation of goods but also intermediate and ancillary services provided in relation to such transportation. These include:
- loading and unloading
- packing and unpacking
- temporary warehousing
Thus, it is important to note that if the above mentioned services are not offered as independent activities. Rather, they are provided for successful delivery of GTA service, then these are also covered under GTA.
GST on GTA Services
A GTA has the following two options to pay tax under the GST regime.
- As per para 1 serial no. 9 (iii) of notification no. 11/2017 – Central Tax (rates), a GTA providing services in relation to transportation of goods including used household goods for personal use can pay effective GST of 5% (2.5% CGST and 2.5% SGST) on such services. However, if the GTA chooses to avail this option, it is subject to a condition that the credit of the input tax charged on goods and services used in supplying the service has not been taken.
- As per notification no. 20/2017, a GTA can provide services pertaining to transportation of goods including used household goods for personal use by paying effective GST of 12% (6% CGST and 6% SGST). However, if the GTA chooses to avail this option, it is subject to a condition that a GTA can avail a credit of input tax charged on goods and services used in supplying the transportation services.
Eligibility of Input Tax Credit
As mentioned above, there are two options through which a GTA can pay GST.
(i) 5% GST Under RCM With No ITC
If a GTA chooses this option, then the recipient of goods or services is required to pay GST at the rate of 5% under reverse charge. Since, the recipient pays GST in this case, the GTA is not entitled to take ITC on the input goods or services used in supplying such services to the recipient.
However, the recipient of GTA service discharging the tax liability is entitled to take Input Tax Credit (ITC) of the amount of tax paid under reverse charge. Provided such an amount is used in the course or furtherance of his business.
(ii) 12% GST With ITC
Since, a GTA was losing out the input tax credit under the RCM option, the GST Council introduced the alternative of paying GST at the rate of 12% with ITC.
Accordingly, a GTA can pay GST at the rate of 12% under forward charge and claim ITC on the goods and services used to provide goods transportation services to the recipient. Even the recipient of goods and services can avail ITC of the GST paid.
Rate of GST on GTA
|Heading||Description of Service by GTA||GST Rate||Condition|
|9965 or 9967||Services provided by a GTA by way of transport in a goods carriage of:||0%|
|9966 or 9973||Services by way of giving on hire to a goods transport agency a means of transportation of goods||0%|
|9965||Services of transporting goods by GTA to specified recipients||12% (6% CGST and 6% SGST)||Provided a GTA can avail a credit of input tax charged on goods and services used in supplying the transportation services|
|9965||Services of goods transport agency (GTA) in relation to transportation of goods including used household goods for personal use||5% (2.5% CGST and 2.5% SGST)||Provided the credit of input tax charged on goods and services used in supplying the service has not been taken|
|9965 or 9967||GTA transporting goods to an unregistered person including an unregistered casual taxable person||Yet to be notified|
Registration of a GTA
As per section 22 (1) of CGST act 2017, every supplier shall be liable to get registered under GST in a state or UT if his aggregate annual turnover in a financial year exceeds Rs. 20 lakhs in case of services.
Such a supplier is liable to be registered in a state or UT from where he makes a taxable supply of goods or services. Also such a state or UT is other than special category states. This means that the moment the aggregate turnover of a GTA exceeds Rs. 20 lakhs, he is required to get registered under GST mandatorily.
However, this threshold limit of 20 lakhs shall reduce to Rs. 10 lakhs in case a GTA has business in any of the special category states such as the north – eastern or hilly states. In addition to this, there are cases where a GTA supplies services subject to reverse charge.
As per notification no. 5/2017 – Central Tax dated June 19, 2017, ‘the persons who are only engaged in making supplies of taxable goods or services, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services under section 9(3) of the CGST act, 2017 are exempted from obtaining registration under the act.’
This means a person or GTA is not required to obtain registration under GST if he is exclusively supplying goods or services the total tax on such goods or services is required to be paid by the recipient under reverse charge mechanism. This is despite the fact that his annual aggregate turnover exceeds Rs. 20 lakhs.
Also, as per section 23(1) of the CGST Act, 2017, any person supplying goods or services that are fully exempt from tax are not required to take registration under GST.
Let’s understand when a GTA needs to register under GST with the help of the following example.
ABC Logistics, a GTA registered in Haryana, provides services pertaining to the transportation of both taxable and exempted goods. Following table showcases different scenarios under which ABC Logistics provides transportation services to recipients.
|Type of Service||Value of Supply||GST Paid By|
|Transporting taxable goods||Rs 8 lakhs||GTA or registered recipient of services /the registered dealer under RCM|
|Transporting exempted goods||Transporting exempted goods||GTA Liable To Pay|
|Total Turnover||Rs 15 Lakhs||Aggregate Turnover is less than Rs 20 Lakhs. GTA is not required to register.|
|Transporting taxable goods||Rs 14 Lakhs||GTA or registered recipient of services /the registered dealer under RCM|
|Transporting exempted goods||Rs 10 Lakhs||GTA Liable To Pay|
|Total Turnover||Rs 24 Lakhs||Aggregate Turnover is more than Rs 20 Lakhs. GTA is required to register|
|Transporting taxable goods||NIL||GTA or registered recipient of services /the registered dealer under RCM|
|Transporting exempted goods||Rs 21 Lakhs||GTA Liable To Pay|
|Total Turnover||Rs 21 Lakhs||Aggregate Turnover is more than Rs 20 Lakhs. But since GTA is supplying exempted goods, he is not required to register|
|Transporting taxable goods||Rs 16 Lakhs||GTA or registered recipient of services /the registered dealer under RCM|
|Transporting exempted goods||Rs 5 Lakhs||GTA Liable To Pay|
|Total Turnover||Rs 21 Lakhs||Aggregate Turnover is more than Rs 20 Lakhs. GTA is required to register|
Reverse Charge Under GTA
As per Sr. No. 1 of paragraph 1 of Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017, the following businesses are required to pay GST on Reverse Charge Basis: Any
- Factory registered under or governed by the Factories Act, 1948
- 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 1948);
- Co-operative society established by or under any law;
- 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;
- Body corporate established, by or under any law;
- Partnership firm whether registered or not under any law including association of persons;
- Casual taxable person; located in the taxable territory
This means that when any of the above category of persons avail GTA services in a taxable territory, a GTA supplier can pay GST at the rate of 12%. If such a person avails this option, he may claim full ITC on the goods and services used to render the goods transportation services to the recipient.
However, if the GTA does not avail this option, then the liability to pay GST would fall on the recipient of goods and services under reverse charge basis. But, if the recipients do not belong to any of the categories mentioned above, then in all such cases, a GTA becomes liable to pay GST.
In addition to this, the GST Council inserted a new clause 21A via Notification No. 32/2017-Central Tax (Rate) dated 13th Oct 2017. As per this clause, services provided by a GTA to an unregistered person, including an unregistered casual taxable person, are exempted from GST.
Note: GTA services rendered to an unregistered person is exempted as per Notification No. 32/2017 – Central Tax (Rate) dated October 13th, 2017. However, this notification was cancelled as on December 31, 2018. This means that GST must be paid under RCM for unregistered purchases on the list of supplies as specified. Such a list of supplies is yet to be specified by the Council.
Who Will Pay GST Under RCM?
Notification No. 13/2017- Central Tax (Rate), dated June 28th, 2017, lists down various services supplied by a specified person that shall be paid on reverse charge basis by the recipient of the such services.
Now, for the purpose of this notification, the recipient of services would be: “the person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory.”
To understand this, let’s consider the following cases.
Case I: Where the Consignor Pays Freight to the GTA
Suppose that the consignor of goods (Supplier) pays freight for transporting the goods to the GTA. As per the rule above, since the consignor (supplier) is the one who pays freight to the GTA, he will be considered as the recipient of goods in this case.
And if the consignor belongs to any category of persons who are required to pay GST under reverse charge as mentioned above, then he will pay GST under reverse charge.
Case II: Where the Consignee Pays Freight to the GTA
Suppose that the Consignee of goods (Recipient) pays freight for transporting the goods to the GTA. As per the rule above, since the Consignee (Recipient) is the one who pays freight to the GTA, he will be considered as the recipient of goods in this case. And if the Consignee belongs to any category of persons who are required to pay GST under reverse charge as mentioned above, then he will pay GST under reverse charge.
Place of Supply In GTA
Section 7 and 8 of the IGST Act, 2017 defines inter-state supply and intra-state supply respectively.
As per section 7 of the IGST Act, 2017, a supply is treated as an inter-state supply if the location of the supplier and the place of supply are in:
- Two different states
- Two different Union Territories
- A State and a Union Territory
As per section 8 of the IGST Act, 2017, a supply is treated as an intra-state supply where the location of the supplier and the place of supply are in the same State or the same Union Territory.
Since now we have an understanding what inter-state and intra-state supply mean, let’s understand the rules for determining the place of supply in case of transportation of goods by road by a GTA.
Rules of Place of Supply in Case of GTA
- If the goods are supplied to a registered person by a GTA, then the place of supply will be the location of such a person.
- In case the goods are transported to a person other than the registered person, then the place of supply will be the location at which the goods are handed over for transportation.
- If the location of the supplier of transportation services and or the location of the recipient of such services is located outside India, then the place of supply of goods transportation services by a GTA shall be the place of destination of such goods.
Accounts & Records By GTA
According to section 35(2) of the CGST Act, 2017, every transporter is required to maintain records of the consignor, consignee and other relevant details of the goods in a prescribed manner. This is irrespective of whether the transporter is registered or unregistered.
In case the transporter is unregistered, he needs to make an application for registration under GST through Form GST ENR-01. This form is used by unregistered persons to take enrolment under GST for (i) warehouse or depot, (ii) godown, (iii) cold storage and (iv) transportation services.
Such persons need to submit all the details regarding their business like address, contact information, constitution of business, nature of premises, details of additional place of business etc in Form GST ENR-01. Once all these details are validated, a unique enrolment number would be generated and communicated to the concerned person.
Therefore, any person who undertakes the business of transporting goods needs to maintain record of goods transported, delivered and goods stored in transit.
Furthermore, he also needs to maintain a record of the GSTIN of the consignor and consignee for each of his branches.
Generation of E-Way Bill
There are cases where the E-Way bill is not generated by the registered person, whether a supplier or a recipient, but goods are handed over to the transporter. In such cases, the registered person shall furnish the information relating to the transporter in Part B of GST EWB-01. But the E-Way bill will be generated by the transporter based on the information furnished by the registered person in Part A of Form GST EWB-01.