Impact of GST on Road Transport Sector | H&R Block | Blog
How will Manufacturing Industry be Affected by GST?
December 21, 2017
How will GST Change Logistics Industry in India?
December 23, 2017

Impact of GST on Road Transport Sector

impact of gst on road transport

Transportation means shifting of goods, passengers etc. from one location to another via various modes of Transport like road, rail, inland waterways or air. Moreover, Transportation is the activity that connects the business to its supply chain partners and customers and is a major influence on the customer’s satisfaction with the company.

 

Impact of GST for Transportation Services

Services of transportation of goods by road are exempt from GST except for the services of:

  • Goods Transport Agency (GTA)
  • Courier Agency

Now the question arises, “what is GTA?”. GTA means any person who provides service in relation to transport of goods by road and issues ‘Consignment Note’ by whatever name called. Thus, transport of goods by road will not be taxable unless the service provider issues consignment note.

 

Note: – Mere bill is not consignment note. It was held in one of the cases that consignment note issued by a GTA represents its liability to:

  • Transport consignment handed over to its destination
  • Undertake delivery of the same to consignee and
  • Temporarily store the goods till

GST Rate on GTA Services (The Dilemma of 5% or 12%)

Services of Goods Transport Agency (GTA) in relation to transportation of goods attract GST @ 5% or 12%. However, the rate of 5% is subject to the condition that the credit of input tax charged on goods or services will not be taken, and the rate of 12% is subject to the condition that the GTA is opting to pay tax @ 12% on all of its GTA services.

 

Therefore, where GTA is not eligible to claim ITC (i.e. @ 5 %), the liability of GST lies on the service recipient (i.e. under RCM). The service recipient can, however, claim the ITC subject to the fulfilment of conditions required to claim any normal ITC.

 

As per Notification No. 32/2017 – Central Tax (Rate) dated 13th October 2017, any service provided by a ‘Goods Transport Agency’ to an unregistered person including an ‘unregistered casual taxable person’ will be Nil rated except for the following service recipients.

 

The following persons would be treated as service recipients:

  • A factory registered under the Factories Act, 1948
  • A society registered under the Societies Registration Act, 1860 or under any law
  • Any cooperative society established under any law
  • A person registered under CGST Act, SGST Act, IGST Act or UTGST Act
  • A body corporate established under any law
  • A partnership firm whether registered or not
  • Casual Taxable Person

In case of services provided by Goods Transport Agency (GTA) (who has not availed the option of paying CGST @ 6% as per Notification no 22/2017 – Central Tax (Rate) dated 22nd August 2017), the service recipient is liable to pay GST, i.e. Reverse charge is applicable. That means, if GTA is availing the option of paying 12% as GST (6% CGST, 6% SGST) then Reverse charge will not be applicable.

 

Special Exemption to some of the GTA Services

As per Notification No 12/2017 – Central Tax (Rate) dated 28.06.2017 following services provided by GTA are out of the ambit of GST:

  • Agricultural produce,
  • Milk, salt and food grain including flour, pulses and rice,
  • Organic Manure,
  • Newspapers or Magazines registered with the registrar of Newspapers,
  • Relief materials meant for victims of natural or man-made disasters, calamities, accidents etc
  • Defense or military equipment,
  • Goods, where consideration charged on a consignment transported in a single carriage is less than Rs. 1500,
  • Goods, where consideration charged for transportation of all such goods for a single consignee does not exceed Rs. 750

If any service is provided to a Goods Transport Agency (GTA) by way of Hire, it is also exempt from GST.

 

There are a lot of rumours in the market about whether Goods Transport Agency (GTA) is required to register under GST or not. As per Notification No 05/2017 – Central Tax dated 19.06.2017, the persons who are engaged in the supply of only those services which are taxable under reverse charge are exempt from registering themselves under GST. Hence, GTA is not required to register under GST if he is exclusively providing transportation of services irrespective of turnover exceeds 20 lacs. But if the GTA chooses the option to pay tax at the rate of 12 % and avail the credit of that input tax, then only GTA is required to register under GST.

 

Place of supply vis-à-vis GTA services

In case of determining the place of supply of services by way of transportation of goods, there are two rules:

 

S. No. Supply to Place of Supply
1 A registered person Location of such person
2 Other than a registered person Location at which goods are handed over for their transportation.

GST is a new and biggest tax reform in India, and a lot of hues and cries are natural for such a significant move. Even the government is constantly on its toes to address all the concerns of the taxpayers. The notifications as mentioned above clarify a lot about the GTA services, but one cannot be sure about the future announcements of the government since GST is yet to mature.

Chetan Chandak
Chetan Chandak
Chetan Chandak is the Head of Tax Research at H&R Block India. He has been with the company for the past five years. He has handled individual taxation, taxation for HNIs and senior management personnel and has represented clients on several occasions in front of various tax authorities. His major area of interest is tax litigation, tax research, handling dual tax impact for ex-pat clients.

2 Comments

  1. JAWAHAR LAL VARSHNEY says:

    sir . I AM WORKING IN NATURE AS PIG IRON AS WELL AS GST RATE 18% NOW ASKED THE QUESTION TRANSPORTATION CHARGES OF GST 5% OR 18%

  2. kritika says:

    sir i have an client who providing transport service to godrej and he charge only transport charges but godrej himself deposit GST on this amount so what is the transporter tax implication whether he required to filing gst return or not because my client take gst number but afterwards he didnot file a single return so please tell me

Leave a Reply

Your email address will not be published. Required fields are marked *