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    Goods Transport Agency

    INTRODUCTION: 

    Transportation service is one of the most critical aspects, that effects our economy as this service is ancillary to all the sectors including manufacturing, agriculture. Any change in taxation of this sector, that effects the transportation costs will have a wide impact on the prices of the goods and services required by common man. Under Service tax regime, services provided by GTA are subjected to tax under reverse charge basis. Now we will see taxability and other aspects under GST for transportation services by way of road. 

    TRANSPORTATION BY WAY OF ROAD: 

    In accordance with the Notification No 12/2017-Central Tax(Rate),all the services by way of transportation through road are exempt from GST, except the services provided by a GOODS TRANSPORT AGENCY (GTA) and COURIER AGENCY. Therefore, GST is applicable on a transporter who comes within the meaning of either GTA or Courier Agency. 

    GOODS TRANSPORT AGENCY: 

    As per Notification No. 11/2017 – Central Tax (Rate) dated 28th June 2017 - “GTA means any person providing the service of Transportation of Goods by road issuing a Consignment Note.”The phrase ‘Consignment Note’ is nowhere defined under GST related Acts. It was defined earlier under Explanation to Rule 4B of Service Tax Rules, 1994. Since Service tax is subsumed into GST we can consider the definition of Consignment Note define under Service Tax. 

    Accordingly, Consignment Note is nothing, but a document issued by the person providing the Service of Transportation of Goods containing the details of the Goods being transported, name of the consignor and Consignee, registration number of the Goods carriage, serially numbered, place of origin and destination, person liable for payment of tax whether the Consignee, consignor or the Goods transport Agency. 

    The issue of the Consignment Note indicates that the liability to transport and safe delivery of the consignment is in the hands of the transporter i.e. the lien on the goods is transferred into the hands of the Transporter until their safe delivery. 

    Without the issue of the Consignment Note and services of mere transportation of the goods in a motor vehicle ,by the service provider will not come with in the ambit of GTA service. 

    The issue of consignment note by GTA depends upon the requirements of service by the service receiver, type of goods being transported, the following are the circumstances which will decide whether consignment note is required to be issued or not: 

    ?Wherethe service involves not only mere transportation of goods.

    ?Takesthe goods into his custody and stores the goods until the commencement of their transportation. 

    ?Heldtobe responsible for their safe delivery to the place of destination. Here the customers are not concerned about the nature of vehicle being used for transportation. They expect safe custody and transportation from the supplier of service. 

    ?Incaseof transportation services other than that of GTA, normally the service recipients will take the vehicle on hire basis for transportation. The service provider being truck operator does not take any lien on goods and does not give guarantee for safe delivery. 

    Example 1: 

    Mr X purchased goods form Mr Y in Gujarat, X has place of business in Maharashtra, for the purpose carrying the goods from Gujarat to Maharashtra, Mr X hired a vehicle and here the responsibility of transporter is limited to provide the vehicle on hire to Mr X and there is no issue of any consignment note. In this case transporter is not covered under the GTA. 

    Example 2: 

    Mr P is a Jewellery merchant having registered place in Hyderabad, he purchased Gold in Karnataka. P engaged a transporter for carrying the purchase to Hyderabad. Here P’s requirement is not merely obtaining a vehicle for hire, for carrying the purchase to his place of business. He expects safe delivery of Gold to his place i.e. transfers the responsibility along with the possession of the Goods by receiving a document indicating that the liability for safe transport of goods is transferred to the Transporter, which is nothing but a consignment note. In this case, the Transporter is said to have provided GTA services. 

    Ultratech Cement vs Commissioner of Central Excise, Kolhapur(2017-TIOL-2714-CESTAT-MUM)where the Appellant is engaged in the business of manufacturing of Cement for which the required raw material Clinker is supplied by Transporters to the premises of factory, for which the Appellant were issued a work order stating that it is the responsibility of the Transporters until the goods are unloaded at the factory premises. For which, a notice was issued alleging that the service received will be covered under GTA service considering the work order as consignment note and the Appellant is required to pay service tax along with interest and penalty. Rule 4A of erstwhile Service Tax Rules, 1994, specifies the particulars to be contained in a consignment note issued. The interpretation placed by the lower authorities is that any document by whatever name, needs to be considered as a consignment note is misplaced and in the present case the transporting companies has only issued Invoices for supply of Clinker as per the contract. The judgement of the present case was drawn from the identical issue in case of NandganjSihori Sugar Co. Ltd Vs CCE, Lucknow (2014-34-STR-850-TRI-Del) wherein it was held by the tribunal after analysing the provisions of GTA under Finance Act, 1994, GTA means a commercial concern which provides service in relation to transport of goods by issue of consignment note. Service tax has been demanded from appellant as a service receiver on the basis of payments made by them against the bills and where no consignment note has been issued as per explanation to Rule 4B of Service Tax Rules, 1994 and the bills raised cannot be treated as consignment note as they do not represent the liability to transport the consignment handed over to it to the destination and deliver the same to the consignee and hence the transporter is not covered under GTA.In view of these reasons, M/s Nandganj do not have any service tax liability. The tribunal has considered the same view in Ultra Tech Cement Ltd after analysing the facts and legal position and concluded that there would be no Service Tax liability and the Impugned order is set aside and the appeal is allowed. 

    TAXABILITY OF GTA SERVICE UNDER GST: 

    We can understand the Taxability of Service provided by Goods Transport Agency by obtaining answers to the following. 

    • What is the Rate of Tax and value of supply to determine the Tax Liability?
    • What is the place of Supply?
    • Who is the Taxable Person in case of GTA?
    • When the Supply of GTA Service should be made Taxable? 

    1     What is the Rate of Tax and Value of Supply to determine the Tax Liability? 

    Rate of Tax is Zero and there is no requirement to pay tax in case of - Services provided by GTA by way of carrying the following items – 

    • Agricultural produce
    • Milk, salt and food grain including flour, pulses and rice
    • Organic manure
    • Newspaper or magazines registered with the Registrar of Newspapers
    • Relief materials meant for victims of natural or man-made disasters
    • Defence or military equipment 
    • Goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage is less than Rs. 1,500/- 

    Example:

    Ajay hired a GTA to transport his goods. The consideration charged was Rs. 1,200. Will Ajay pay GST? 

    Ajay will not pay GST under RCM as the consideration for transportation of goods on a consignment transported in a single carriage is less than Rs. 1,500. 

    • Goods, where consideration charged for transportation of all such goods for a single consignee does not exceed Rs. 750/- 

    Example: 

    Vinod hired a GTA to transport goods. The GTA was asked to come 2 days as Vinod would receive the goods in batches. The entire consideration was Rs. 600. Will Vinod pay GST? 

    Vinod will not pay GST because the consideration charged for transportation of all such goods for a single consignee does not exceed Rs. 750/-.

     

    Rate of tax in other cases:

     

     

     

     

     

     

     

    Rate of Tax opted by GTA

    Condition

     

     

     

     

     

     

    12%

    No restriction relating to availing of Input tax

     

     

    credit.

     

     

     

     

     

     

     

     

     

    5%

    Input tax credit cannot be availed for discharging

     

     

    the output tax liability by GTA.

     

     

     

     

     

     

     

     

    ?Valueofservice:

     

     


    Value of the service shall be determined in accordance with the provisions specified in section 15 of the CGST Act, 2017. The value of supply shall also include the charges collected for providing ancillary services like loading and unloading, packing and unpacking and temporary warehousing etc. in addition to actual transportation of goods. 

    If the ancillary services are provided as an independent activity, then the value relating to such service should not be included in the taxable value determined for GTA service. 

    Example: 

    Navata Road Transport(GTA) has provided service of transportation of Goods to a Motor Vehicle manufacturing company registered under respective Factories Act to transport 250 Motor Vehicles to dealers. Here Navata is a GTA and it is held to be responsible for the goods until safe delivery to the respective dealer, now whole of the consignment of 250 Motor vehicles cannot be transported at a time in a single conveyance. So, it warehouses the goods till their transportation. Here the service of warehousing of vehicles is provided as an ancillary and not as an independent Service. So, the charges whatever collected for warehousing also should be included in the Value of service for determining the taxable value. 

    2     What is the place of Supply? 

    Determination of Place of Supply depends upon whether the service recipient is registered or other than registered person. 

    Recipient if -

    Place of Supply U/S 12(8) of IGST Act, 2017

     

     

    shall be -

     

    Registered under GST Act

    Location of the recipient

     

     

     

     

    Not Registered under GST Act

    Location at which goods are handed over for their

     

    transportation.

     

     


    Example:
     

    Mr A is a registered dealer in goods, having registered place of business in Chennai, Mr A purchased goods in Mumbai and handed over the goods to the transporter, to deliver them in Hyderabad. According to section12(8) of IGST Act,2017 the place of supply shall be the registered place of business of A which is Chennai. If, in case A is not registered then the place of shall be Mumbai where the goods are handed over for their transportation. 

    3     Who is the Taxable Person in case of GTA? 

    Taxable Person is the Person who has obtained Registration as per the Sections 22 and 24 of the CGST Act 2017. 

    Generally, the taxable person shall be the Supplier of the service or goods but section 9(3) of the CGST Act, 2017 through notification no.13/2017 of Central tax, specified certain services for which recipient of service is held as the taxable person and liable to comply with all the applicable provisions of the Act.

    One among the services notified is, the service provided by the Goods Transport Agency. 

    In case where a GTA has opted to pay GST at 12% by availing corresponding input tax credit, then the recipient of the said service is not required to pay tax under reverse charge basis. In such situation, the Goods Transport Agency is required to charge GST at 12% and pay the same to Government. 

    In case where the transportation of Goods by road is undertaken by a GTA who has not opted to pay GST at 12% and the Recipient of Service is any of the persons mentioned below, in such a case, the recipient of the service will be the taxable person and liable to pay tax at the rate of 5%under reverse charge basis. In this case, the GTA supplying the transportation services is not required to pay any GST. 

    Recipient of the Service Notified for Reverse Charge:

    • Any Factory registered under or governed by the Factories act 1948; or 
    • Any Society registered under the Societies Registration Act, 1860 or any other law for the time being in force in any part of India; or 
    • Any Cooperative Society established by or under any law; or 
    • Any person registered under the Central Goods and Service tax Act or State Goods and Service Tax Act or Union Territory Goods and Service Tax Act or the Integrated Goods and Service Tax Act; or
    • Any partnership firm whether registered or not under any law including association of persons; or 
    • Any Body Corporate established by or under any law including Association of persons; or
    • Any casual taxable person located in the taxable territory. 

    Example: 

    M/s ABC solutions is a Private Limited Company having turnover less than 20 lakhs (as per Section 22(1) of CGST Act,2017 it is not required to obtain registration under GST). It has obtained GTA service. Here M/s ABC being a notified person as mentioned above. So he is liable to pay tax under reverse charge and required obtain registration under GST as per Section 24(III) of CGST Act, 2017 even his turnover is less than 20 Lakhs notwithstanding anything contained under Section 22(1) of CGST Act, 2017. 

    Example: 

    Mr. T is an Individual not registered under GST Act in this case Mr. T is not covered under the list of notified persons mentioned above and he is not required to pay tax under reverse charge if he receives any service from GTA. 

    As per Notification No. 13/2017- central Tax - Recipient of Service shall be the person who is in the taxable territory and liable to pay freight for the transportation of goods by road in a goods carriage. 

    Example: 

    Mr P(consignor) having place of business in Mumbai registered under GST is required to supply goods to its customer(consignee) located in Delhi. Mr P has paid the freight charges for the transportation. In this case, Mr P is the recipient of service and he will be liable to pay tax under Reverse charge. 

    The person paying tax under reverse charge has to issue an Invoice under section 31(2)(f) of CGST Act, 2017 on the date of receipt of goods and shall issue a payment voucher as per Section 31(2)(g) of CGST Act, 2017 at the time of making payment to the supplier. 

    If GTA opts to pay tax under forward charge basis even for the supplies made to notified persons mentioned above. Then he is required to obtain registration subjected to the limit of aggregate turnover. In such situation, the recipient of services is not required to pay any GST under reverse charge. 

    In case GTA opts to pay tax at rate of 12% there is no restriction with respect to eligibility of input Tax credit. 

    In case GTA opts to pay tax at rate of 5% then he is not allowed to discharge his output tax liability using Input Tax credit. Further, as stated above, with respect to supplies to notified persons, the said persons are required to pay tax at the rate of 5% under reverse charge. 

    Irrespective of the rate at which tax is being paid by GTA, the recipient of service of GTA is eligible to avail the Input tax Credit upon obtaining GTA service i.e. either at 5% or at 12% as the case may be. 

    As per Notification No. 5/2017- Central Tax dated 19/06/2017, a person who is engaged in making onl 

    supplies of taxable goods/services on which reverse charge applies is exempted from obtaining

    registration under GST. Thus, GTA is not required to obtain registration if, he is solely engaged in transporting goods where the total tax is required to be paid by the recipient under reverse charge basis (even if the turnover exceeds 20 lakhs).

     

     

    Situation

    Supplies Made To

    Turnover

    Taxable Person is

    Registration

    1.

    Notified

    Persons

    15 Lakhs

    Notified

    Persons

    A g g r e g a t e

     

     

    a s  m e n t i o n e d

     

    under

    Reverse

    Turnover  is  less

     

    above

     

     

    charge

     

    than 20Lakhs. GTA

     

     

     

     

     

     

    is not required to

     

     

     

     

     

     

    take registration

     

    Others

     

    3 Lakhs

    G T A  s i n c e

     

     

     

     

     

    R e c i p i e n t  i s

     

     

     

     

     

    Unregistered

     

    2.

    Notified

    Persons

    19 Lakhs

    Notified

    Persons

    A g g r e g a t e

     

    a s  m e n t i o n e d

     

    under

    Reverse

    Turnover is more

     

    above

     

     

    charge

     

    than  20  Lakhs.

     

     

     

     

     

     

    GTA is required to

     

     

     

     

     

     

    take registration

     

     

     

     

     

     

     

    Others

     

    3 Lakhs

    G T A  s i n c e

     

     

     

     

     

    R e c i p i e n t  i s

     

     

     

     

     

    Unregistered

     

    3.

    Notified

    Persons

    23 Lakhs

    Notified

    Persons

    A g g r e g a t e

     

    a s  m e n t i o n e d

     

    under

    Reverse

    Turnover  is  more

     

    above

     

     

    charge

     

    than 20Lakhs. GTA

     

     

     

     

     

     

    not  required  to

     

     

     

     

     

     

    obtain registration

     

     

     

     

     

     

    (Notification  No

     

     

     

     

     

     

    5/201 Central tax)

     

    Others

     

    -

    -

     

     

     

    Determining whether GTA is liable to obtain registration.

    (Note: In case where a GTA opts to pay GST at the rate of 12% by availing ITC, then he is required to obtain registration irrespective of his turnover) 

    4     When the Supply of GTA Service should be made Taxable? 

    In case where recipient of service of GTA is the taxable person (Tax being paid under reverse charge basis) then the time of taxability should be determined as per the provisions of Section 13(3) of the CGST Act, 2017 as follows: 

    The time of supply shall be the earlier of the following dates, namely: 

    1. The date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or 
    1. The date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier  

    Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the date of entry in the books of account of the recipient of supply 

    In case where GTA is the taxable person (Tax being paid under forward charge basis) then the time of taxability should be determined as per the provisions of section 13(2) of CGST Act, 2017. 

    The time of supply of services shall be the earliest of the following dates, namely: 

    1. The date of issue of invoice (issued as per section 31(2) of the CGST Act, 2017) by the supplier, if or the date of receipt of payment, whichever is earlier; or 
    1. The date of provision of service, if the invoice is not issued as per section 31(2) of the CGST Act, 2017 or the date of receipt of payment, whichever is earlier; or 

    The date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply.

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