Applicability of GST on Goods Transport Agencies (GTA)

The transportation industry plays a pivotal role in the development of a nation’s economy. In fact, the progress of a nation and the progress of its transportation industry are complementary.

The same holds true for India, where the road transport industry has had the lion’s share of influence on India’s economic development. More recently, the industry has been in the limelight regarding the new Goods and Services Tax (GST), which is applicable on freight charges involving goods transport agencies (GTA).

The question arises whether charging tax on this industry is a new concept. The answer is, no. In the previous law, services provided by GTA (i.e. transport of goods by road service rendered by a GTA) were liable to a service tax on a reverse charge basis, where the person receiving the service was responsible for payment of tax.

In the GST regime, the same legal position prevails, but the scope of the tax has been widened.

Meaning of GTA

GST laws define GTA in notification no. 12/2017-Central Tax (Rate) dated 28.06.2017), which states that, ‘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’.

Thus, the transporter must issue a consignment note in order for a service provider to be considered a GTA. If the transporter does not issue a consignment note, the service provider will not come within the ambit of GTA.

Services not provided by GTA not under the purview of GST

In the same notification mentioned above, the following services were exempted from GST:

(a) Services by way of transportation of goods by road, except the services of:

(i) a GTA

(ii) a courier agency

(b) Services by way of transportation of goods by inland waterways

Thus, only transportation services rendered by a GTA are subject to GST. The mere transportation of goods by road is exempt from GST.

Levy of GST

Section 9 of the Central GST (CGST) Act pertaining to the levy and collection of GST states that, ‘the Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both’.

Reverse charge mechanism on GTA services

Pursuant to the enabling provision stated above, on 28 June 2017 the government specified categories of persons responsible for paying GST under the reverse charge mechanism.

These categories include:

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

(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

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

(d) any person registered under the CGST Act, the Integrated GST (IGST) Act, the State GST (SGST) Act, or the Union Territory GST (UTGST) Act

(e) anybody corporate established, by or under any law

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

(g) any casual taxable person

Applicable GST rates

GTA services (including transportation of used household goods for personal use) attract a GST rate of either 5 percent (2.5 percent CGST, 2.5 percent SGST), or 12 percent (6 percent CGST, 6 percent SGST). The rate of 5 percent is subject to the condition that service providers have not taken input tax credit (ITC) for the tax charged on the goods or services used in supplying the service.

To conclude, if the categories of persons listed above have availed services, the GTA supplier has the option to pay tax at 12 percent and take ITC. If the GTA supplier does not avail this option, however, the liability is on the recipient to pay GST at 5 percent, without taking ITC.

Exempt services

The following services provided by GTA by way of transport in a goods carriage are exempt from payment of tax:

(a) agricultural produce

(b) goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed Rs. 1,500

(c) goods, where consideration charged for transportation of all such goods for a single consignee does not exceed Rs. 750

(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 mishaps

(h) defence or military equipment

The CGST Act gives a tax payment exemption to services received by GTA. No GST is payable on transactions where the GTA has hired a means of transportation of goods.

In a nutshell, the GST law continues the provisions prevailing under the previous tax regime. The new law recognises that service of transportation of goods is often provided by persons in the unorganised sector. Hence the law specifically excludes such operators from GST. Instead, GST is only applicable to those transportation services rendered by a GTA.

With respect to those who provide GTA services, the GST law provides that the recipients of services are liable to pay tax in most cases, unless the GTA has exercised the option to pay under forward charge (i.e., at a higher rate of 12 percent).

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