Goods Transport Agency in GST

Goods Transport Agency in GST

Background of levying tax on the services of Goods Transport Agency The levy of Service Tax on Road Transportation Service has always been a contentious issue. The Finance Act, 1997 had levied Service Tax on Goods Transport Operators w.e.f. 16-11- 1997 which was subsequently withdrawn after nation-wide strike. Thereafter by the Finance (No. 2) Act, 2004 Service Tax was imposed on Transport of Goods by Road service rendered by a goods transport agency with effect from 10-09-2004. However, the levy was deferred until further notice again in view of Transporters strike. The Government thereafter constituted a Committee to deal with the issue and after taking into account the recommendations of the Committee, Notification Nos. 32 to 35/2004 ST all dated 03- 12-2004 were issued, levying tax on Transport of Goods by Road with effect from 01-01-2005. The legal position prevailing under Service Tax is being continued under the GST regime. The services of transportation of goods by road (except services of GTA) continue to be exempt even under the GST regime. In so far as the services of GTA is concerned, if the services (of Goods Transportation) are provided (by the GTA) to specified classes of persons, the tax liability falls on such recipients under the reverse charge mechanism. The following discussions will clarify the position. Transportation of Goods by Road In terms of Notification no. 12/2017-Central Tax (Rate) dated28.06.2017 (Sr. No.18), the following services are exempt fromGST Services by way of transportation of goods (Heading 9965):-

(a) by road except the services of:

(i) a goods transportation agency; (ii) a courier agency;

(b) by inland waterways.

Thus, it is to be seen that mere transportation of goods byroad, unless it is a service rendered by a goods transportationagency, is exempt from GST.

Who is a GTA Goods Transport Agency As per Section 65B (26) of the Finance Act, 1994; GoodsTransport Agency means any person who provides service inrelation to transport of goods by road and issues consignmentnote, by whatever name called. Therefore, in the Service Taxregime, issuance of Consignment Note (C/N) was integral andmandatory requirement before any road transporter could bebrought within the ambit of GTA. Position under GST Under GST laws, the definition of Goods Transport Agency isprovided in clause (ze) of notification no.12/2017-Central Tax(Rate) dated 28.06.2017. (ze) goods transport agency means any person whoprovides service in relation to transport of goods by road andissues consignment note, by whatever name called; Thus, it can be seen that issuance of a consignment note isthe sine-qua-non for a supplier of service to be considered asa Goods Transport Agency. If such a consignment note is notissued by the transporter, the service provider will not comewithin the ambit of goods transport agency. If a consignmentnote is issued, it indicates that the lien on the goods has beentransferred (to the transporter) and the Transporter becomesresponsible for the goods till its safe delivery to the consignee. It is only the services of such GTA, who assumes agency functions,that is being brought into the GST net. Individual truck/tempooperators who do not issue any consignment note are notcovered within the meaning of the term GTA. As a corollary, theservices provided by such individual transporters who do notissue a consignment note will be covered by the entry at Sr. No. 18of notification no.12/2017-Central Tax (Rate), which is exemptfrom GST. What is a consignment note Consignment Note is neither defined in the Act nor in thenotification no.12/2017-Central Tax (Rate). Guidance can be takenfrom the meaning ascribed to the term under the Explanationto Rule 4B of Service Tax Rules, 1994. In terms of the saidrule, consignment note means a document, issued by a goodstransport agency against the receipt of goods for the purposeof transport of goods by road in a goods carriage, which isserially numbered, and contains the name of the consignor andconsignee, registration number of the goods carriage in whichthe goods are transported, details of the goods transported,details of the place of origin and destination, person liable forpaying service tax whether consignor, consignee or the goodstransport agency. Charge of GST on services provided by GTA In terms of notification no. 11/2017-Central Tax (Rate) dated28.06.2017 as amended by notification no. 20/2017- Central tax(Rate) dated 22.08.2017 , Sr. No. 9 and Sr. No. 11, (i) Services ofgoods transport agency (GTA) in relation to transportationof goods (including used household goods for personal use) (Heading 9965 &9967 respectively) attracts GST @2.5% or 6%CGST. Identical rate would be applicable for SGST also, takingthe effective rate to 5% or 12%. However, the rate of 5% is subjectto the condition that credit of input tax charged on goods orservices used in supplying the service has not been taken. TheExplanation to the notification further clarifies that it shallmean that,- (a) credit of input tax Charged on goods or servicesused exclusively in supplying such service has not been taken;and (b) credit of input tax charged on goods or services usedpartly for supplying such service and partly for effecting othersupplies eligible for input tax credits, is reversed as if supply ofsuch service is an exempt supply and attracts provisions of subsection(2) of section 17 of the Central Goods and Services Tax Act, 2017 and the rules made there under. GST @ 6% CGST (12% cumulative) is subject to the condition thatthe 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. Further, there isno restriction on the GTA from taking ITC if this option is availed. Thus, where the GTA is not eligible to take ITC for the supplieseffected by it and the liability under GST is discharged underreverse charge basis, the recipient of GTA service discharging thetax liability is entitled to take Input Tax Credit (ITC) of the amountof tax paid under reverse charge, provided it is used in the courseor furtherance of business at his end. Further the recipient wouldbe eligible for ITC of the GST paid by GTA on forward charge basis.Notification no. 11/2017-Central Tax (Rate), Sr. No.11, (ii) also providesthat supporting services in transport other than those mentionedin (i) (Heading 9967) would attract GST @9% CGST. Identical ratewould be applicable for SGST also, taking the effective rate to 18%.Similar rate has been prescribed for services falling under heading9965 in terms of notification no. 11/2017-Central Tax (Rate), Sr. No. 9 (v). Person Liable to Pay GST on GTA services The liability to pay GST devolves on the recipients for supply ofservices by a goods transport agency (GTA)who has not paidcentral tax at the rate of 6%, in respect of transportation ofgoods by road(in terms of notification no. 13/2017-Central Tax(Rate) dated 28.06.2017 (Sr. No.1) as amended by notificationno. 22/2017-Central Tax (Rate) dated 22.08.2017, if the recipients(located in the taxable territory)belong to the following category:

(a) Any factory registered under or governed by the FactoriesAct, 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 inforce 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 ServicesTax Act or the Integrated Goods and Services Tax Act orthe State Goods and Services Tax Act or the Union TerritoryGoods 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 anylaw including association of persons; or

(g) any casual taxable person.

Thus in cases where services of GTA are availed by the abovecategories of persons in the taxable territory the GTA supplierhas the option to pay tax (and avail ITC) @12% (6% CGST + 6%SGST); and if the GTA does not avail this option, the liability topay GST will fall on the recipients. In all other cases where therecipients do not fall in the categories mentioned above, theliability will be on the supplier of GTA services.

GTA services specifically exempt In terms of notification no.12/2017-Central Tax (Rate) dated28.06.2017 (Sr. No.21), the following services provided by a GTA(Heading 9965 or 9967) is exempt from payment of tax: Services provided by a goods transport agency, by way oftransport in a goods carriage of:

(a) agricultural produce;

(b) goods, where consideration charged for the transportationof goods on a consignment transported in a single carriagedoes not exceed one thousand five hundred rupees;

(c) goods, where consideration charged for transportationof all such goods for a single consignee does not exceedrupees 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 ofNewspapers;

(g) relief materials meant for victims of natural or man-madedisasters, calamities, accidents or mishap; or

(h) defense or military equipments.

Similarly, the following services received by the GTA (Heading9966 or 9973) is also exempt in terms of notification no.12/2017-Central Tax (Rate) dated 28.06.2017 (Sr. No.22) Services by way of giving on hire :

(b) to a goods transport agency, a means of transportation ofgoods.

Thus, if the GTA hires a means of transportation of goods, no GSTis payable on such transactions. Significance of the term in relation to in the definition of GTA The use of the phrase in relation to has extended the scope ofthe definition of GTA. It includes not only the actual transportationof goods, but any intermediate/ancillary service provided inrelation to such transportation, like loading/unloading, packing/unpacking, trans-shipment, temporary warehousing, etc. If theseservices are not provided as independent activities but are themeans for successful provision of GTA Service, then they are alsocovered under GTA. Conclusion The above discussion shows that not all transport of goods byroad is by a GTA. To qualify as services of GTA, the GTA should benecessarily issuing a consignment note. Only services providedby a GTA are taxable under GST. Services of transportationof goods by a person other than GTA are exempt. Moreover,in cases where the service of GTA is availed by the specifiedcategories of persons in the taxable territory, the recipients whoavail such services are the ones liable to pay GST and not the supplier of services unless the GTA opts for collecting and payingtaxes @ 12% (6% CGST + 6% SGST). In all other cases where GTAservice is availed by persons other than those specified, the GTA service supplier is the person liable to pay GST. The GTA servicesupplier is not entitled to take ITC on input services availed by himif tax is being charged @ 5% (2.5% CGST + 2.5% SGST). In case the GTA service supplier hires any means of transport to provide hisoutput service, no GST is payable on such inputs. In a nutshell, the GST law continues the provisions prevailingunder the Service Tax regime. The law recognizes that puretransportation of goods services are mostly provided bypersons in the unorganized sector and hence has specificallyexcluded such operators from the tax net. In respect of those who provide agency services in transport, the liability is caston the recipients in most of the cases or unless option to payunder forward charge has been exercised by the GTA.