GST on Transport | Goods Transport Agency under GST

Last Update Date : August 13, 2018

Goods Transport Agency under GST

With the need to move Goods and Services around the globe comes the basic understanding of the word “Transportation” – the formalities, financial flows and more inevitably tax structure of any country related to the same. Talking about our motherland India, recently the most powerful taxation reform happened to take its position, widely known as Goods and Services Tax (GST). GST has subsumed all the different indirect taxes like excise duty, VAT, CST, Service Tax, Entry Tax etc. just to remove the cascading effect of double taxation, create a unified national market and obviously boost the economic growth.

Transportation plays a vital role in bringing the sustainable growth and development in the country and undoubtedly the most popular mode of transportation in India is through road. Transportation of Goods through road is mainly done by transporter agency. Let’s talk in detail about the Goods Transportation Agency (GTA) i.e. the Transporter.

What is GTA?

As per Notification 12/2017 – Central Tax (Rate), “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.

What is a Consignment Note?

Consignment note merely is a document issued by a goods transportation agency against the receipt of goods for the purpose of transporting the goods by road in a goods carriage. If a consignment note is issued, it indicates that the lien on the goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till its safe delivery.

Note: A consignment note is compulsorily required to be issued for a transporter to qualify it to be a goods transport agency. This means that others might also undergo the transport business but only those issuing a consignment note would be treated as a goods transport agency.

Generally, a consignment note is serially numbered and contains:

  • the name of the consignor and consignee,
  • registration number of the goods carriage in which the goods are transported,
  • details of the goods transported,
  • details of the place of origin and destination,
  • person liable to pay GST – whether consignor, consignee or the goods transport agency.

The significance of the term “In relation to” in the definition of GTA

The use of the phrase ‘in relation to’ has extended the scope of the definition of GTA. This actually means that GTA includes not only the actual transportation of goods but any intermediate/ancillary service provided in relation to such transportation too like:

  • Loading / unloading,
  • Packing / unpacking,
  • Trans-shipment,
  • Temporary warehousing, etc.

Compliance methodology for GTA

A GTA has to deal with the following 2 situations which will form a decisive factor on whether the registration under the GST law is required or not:

Situation 1: Providing services to specified category of 6 recipients which fall under section 9 (3) of the CGST Act – Reverse charge mechanism applicable and the recipient will discharge the tax liability using a tax rate of 5%. These categories comprise of:

  1. A factory registered under the Factories Act, 1948
  2. A society registered under the Societies Registration Act, 1860 or under any law
  3. Any cooperative society established under any law
  4. A person registered under CGST Act, SGST Act, IGST Act or UTGST Act
  5. A body corporate established under any law
  6. A partnership firm whether registered or not
  7. Casual Taxable Person

In such a situation, the GTA has no obligation to register itself under the GST regime. However, he may do so on voluntary basis

Situation 2: Providing services to other than specified category of 6 categories – This scenario leaves the option with the GTA to register or not depending upon the intention of the GTA whether it wishes to avail the input tax credit or not.

  1. GTA intends to avail the Input tax credit: GTA will have to register under the GST act and charge GST at the rate of 12% to all its customers and pay the liability under forward charge. He can avail and utilise the input tax credits from the output tax payable before making the final payment.
  2. GTA does not intend to avail the Input tax credit: It will not be obligatory for the GTA to register under GST as the recipient will have to make the payment of GST under reverse charge mechanism at a rate of 5%.

Note: Therefore, we can say that a GTA does not have to register under GST if he is exclusively transporting goods where the total tax is required to be paid by the recipient under reverse charge basis (and he does not intend to take the input tax credit on goods / services availed by him) (even if the turnover exceeds 20 lakhs) – Notification 05/2017 dated 19/06/2017.

Clarification on who will pay the tax under reverse charge mechanism

As per Notification No. 13 / 2017- Central Tax (Rate) dated 28/06/2017 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 shall be treated as the receiver of service.

Generally, the supplier sent the goods to the Recipient through GTA under normal situation.

If Payment is made by Sender

In case of reverse mechanism the person who pays or is liable to pay the freight for the transportation of goods by road in a goods carriage, located in the taxable territory shall be treated as the receiver of service. Let’s say for instance if the sender or Consignor pays to GTA under Reverse Charge Mechanism, he shall be considered as the receiver of service.

If Payment is made by Receiver

In case of reverse mechanism the person who pays or is liable to pay the freight for the transportation of goods by road in a goods carriage, located in the taxable territory shall be treated as the receiver of service. Let’s say for instance if the receiver or consignee pays to GTA after receiving the goods under Reverse Charge Mechanism, he shall be considered as the receiver of service.

The Concept of Input Tax Credit

As per notification No 20 / 2017-Central Tax (Rate) 22nd August 2017, GTA has to opt either of the below options as discussed earlier:

  • 12% GST with ITC (Forward Charge), or
  • 5% GST with no ITC (Reverse Charge)

Which returns are required to be filed by GTA?

A registered GTA if collecting and paying the tax under normal charge at a rate of 12%, is required to file 3 regular returns on a monthly basis:

  • GSTR-1 (Invoice wise sales details),
  • GSTR-2 (Invoice wise purchases details) &
  • GSTR-3 (Monthly summary & calculation of final tax liability)

However, the filing of GSTR 2 & 3 is suspended at current and will be required to be filed only once the government notifies the due dates for filing of the same.

Frequently Asked Questions on GTA

1. What service of transportation of goods is exempt under GST?

Answer: The service of transportation of goods by road and by inland waterways are exempted even under the GST regime except

  • the services by GTA or
  • a courier agency

2. Ashish is the owner of small tempo transports services in the local areas of his state, is he liable for the local movement of goods?

Answer: No, as it cannot be classified as a GTA

3. What about the payment and mode of tax in case of taxes required to be paid on reverse charge basis?

Answer: As GTA falls under the category of reverse charge mechanism, the recipient cannot utilize the ITC for payment of tax under reverse charge. So, payment of tax will be only through cash.

4. What is the Place of Supply, Rates of GST for GTA?

Answer: In case of determining the place of supply of services by way of transportation of goods, there are two rules follow the below link for more details on the place of supply and rates.

5. Raman hired a GTA to transport his goods. The consideration charged was Rs 1,350. Will Raman pay GST?

Answer: 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 (specific exemption provided).

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

Answer: Kumar will not pay GST under RCM because the consideration charged for transportation of all such goods for a single consignee does not exceed Rs 750 (specific exemption provided).

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