written by Khatabook | September 13, 2021

Impact Of GST On Goods Transport Agency

Transportation is an important aspect of every business, and in India, the most common mode of transportation is via road.  A transport agency handles the transportation of goods and commodities through the road. The imposition of a service tax on transportation services by road has long been a source of debate. Under the Goods and Services Tax (GST) regime, the service tax on goods transit by road was exempted up to 75%. There are some instances where the Goods Transport Agency (GTA) services are subject to taxation. Let’s discuss transport GST and GTA services under GST and the different factors influencing it. 

Overview of Tax on Goods Transport Agency (GTA) Services

The Finance Act of 1997 imposed a Service Tax on Goods Transport Operators from November 16, 1997, but it was later revoked due to a nationwide protest. After that, on September 10, 2004, the Finance Act of 2004 imposed a Service Tax on Transport of Goods by Road services supplied by a GTA. 

However, due to the transporters' strike, the levy was again postponed until further notice. After that, the government formed a committee to address the problem. Following the Committee's suggestions, Notice Nos. with effect from 01-01 2005, Regulations 32 to 35–  all dated 03-12-2004, were issued, incurring a tax on goods carried by road.

What is a GTA?

A GTA denotes any agency that performs service in respect to the transportation of goods by road and provides a consignment note by whatever name called,' according to Section 2 of the Central Board of Indirect Taxes and Customs (CBIC) Notification No. 12/2017 dated 28th June 2017.

It's worth noting that a road transporter must issue a consignment notice before being included in a GTA's jurisdiction. A consignment notice is a document of carriage of goods by road declaring the contract of carriage and instructions provided to the carrier. This indicates that if a transporter fails to issue a consignment note, the service provider will fall outside GTA's jurisdiction.

On the other hand, a consignment letter states that the lien on the goods has been transmitted to the transporter. As a result, the carrier assumes responsibility for the items until they are delivered to the consignee.

What is the GST rate on GTA?

The Goods Transport Agency  (GTA) is taxed at two different rates. GTA under GST depends on the availability of Input Tax Credit (ITC). GST might be charged at a rate of 5% or 12% by the goods transport agency depending on different circumstances.

  • Transport GST rate for the GTA is 5%, where GTA is not allowed to claim input tax credits on commodities and services used in providing services.
  • Transportation GST Rate for GTA is 12%, under the forward charge method.
  • For GTA, any additional merchandise is 5% without the ITC and 12% with the ITC.
  • If GTA charges 12% for transporting products to 7 specific recipients, GTA must deposit tax to claim ITC. Alternatively, if the GTA levies 5%, Reverse Charge Mechanism (RCM) applies, and the recipient is required to deposit tax, and they won’t be able to avail ITC.
  • GST shall not be paid on any other GTA services such as transporting agricultural commodities, milk, legumes, rice, wheat, newspaper, and magazine.
  • In circumstances where the value charged for the transportation of goods on a consignment conveyed in a single carriage is less than Rs.1500, GST on transport services would not be applied.
  • In circumstances where the amount charged for transportation of items for a single recipient does not exceed Rs.750, GST on GTA will not be imposed.

Who is responsible for paying GST on GTA?

In the event of a GTA, here is a list of those who are liable to pay GST:

Consignor

Consignee

GST-Payable person

A company 

Partnership Firm

Company

A partnership firm

Registered Dealer 

Registered Dealer 

A Co-Op Society Ltd

Registered Dealer 

Registered Dealer 

Unregistered dealer (URD)

Registered Dealer

Registered Dealer

Also Read: Impact of GST on Different Sectors

What are the services that a GTA Provides?

The goods transport agency (GTA) does not only provide services linked to product transportation. But also to the interim and ancillary services that go along with it, such as:

  • Packing and unpacking
  • Loading and unloading
  • Trans-shipment
  • Temporary warehousing

HSN codes of Goods Transport Agency (GTA)

The HSN stands for ‘Harmonized System of Nomenclature,' a globally recognised code system. Let's take a look at the HSN Code for GTA, which is usually 6 digits long.

6 Digits HSN Code for GTA:

996511

Road Transport Services of Goods Including Letters, Parcels, Live Animals, Household & Office Furniture, Containers Etc By Refrigerator Vehicles, Trucks, Trailers, Man Or Animal Drawn Vehicles or any other Vehicles.

996512

Railway Transport Services of Goods Including Letters, Parcels, Live Animals, Household & Office Furniture, Intermodal Containers, Bulk Cargo etc.

996513

Transport Services of Petroleum & Natural Gas, Water, Sewerage and Other Goods via Pipeline.

996519

Other Land Transport Services of Good.

996521

Coastal and Transoceanic (Overseas) Water Transport Services of Goods by Refrigerator Vessels, Tankers, Bulk Cargo Vessels, Container Ships, etc.

996522

Inland Water Transport Services of Goods By Refrigerator Vessels, Tankers and Other Vessels.

996531

Air Transport Services of Letters & Parcels and Other Goods.

996532

Space Transport Services of Freight.

What is a Consignment Note?

A consignment note is a document produced by a GTA when items are received to be transported by road in a goods carriage. Consignment note includes the following details:

  • Full Name of the consignor and consignee
  • Serial number
  • Registration number
  • Complete Details of goods transported
  • Place of origin and destination
  • Details on whether the taxpayer is the consignor, consignee, or GTA. 

The essential criterion for a transporter to be classified as a Goods Transport Agency is issuing a consignment note. When a consignment note is issued, it means the goods' lien has been passed to the transporter, and the transporter is now responsible for the goods until they are safely delivered to the consignee.

The Input Tax Credit's Eligibility

There are two ways to pay GST in the GTA: 5% GST without ITC and 12% GST with ITC. The GTA must choose GST at the start of the fiscal year.

  • With no ITC, the GST rate is 5% under the Reverse Charge Mechanism (RCM): If a GTA opts for this option, the receiver of goods or services must pay GST at the reverse charge rate of 5%. The GTA is not eligible for ITC on the input goods or services utilised to provide such services to the receiver. The recipient of a GTA service that discharges a tax burden, on the other hand, is eligible for an Input Tax Credit (ITC) for the taxes paid under RCM.
  • With ITC, the GST rate is 12%: The GST Council added the option to pay GST at 12% with ITC because a GTA lost the input tax credit under the RCM. To collect ITC on the products and services used to deliver them to the receiver, GTA in GST is charged at 12% under the forward charge.

What is the procedure for registering a GTA?

There was some uncertainty over whether or not a GTA was required to register for GST. According to section 22(1) of the CGST Act 2017, every supplier in a state is obligated to register for GST and services if the GTA's total revenue surpasses Rs. 20 lakhs.

According to the notification number. 5/2017 – Central Tax, dated June 19, 2017, if a person is only selling goods or services, they do not need to register under GST. However, the recipient must pay the complete tax on such goods or services under the reverse charge system. Furthermore, under section 23(1) of the Central Goods and Services Tax (CGST) Act, 2017, any person delivering exempt products such as meat and fish, fruits and vegetables, cereals, potatoes etc., or services do not need to register for GST.

For GTA, is there a reverse charge mechanism (RCM)?

The term "reverse charge" refers to the obligation of the recipient of goods and services to pay tax rather than the supplier.

RCM on GTA under GST

The following firms (service recipients) are required to pay GST under the reverse charge mechanism:

  • Any GST-registered individual
  • Any factory supervised or registered by the Factories Act of 1948
  • Any general partnership, whether it is registered under any legislation, includes a group of people
  • A society incorporated under the Societies Registration Act of 1860 or any other statute.
  • Any legal entity created by or under any legislation
  • Anyone who isn't a regular taxpayer

Who is eligible to  Pay GST Under RCM?

The Notification No. 13/2017- Central Tax (Rate), dated June 28th, 2017, identifies several services provided by a certain person or persons that must be paid tax on a reverse charge mechanism by the recipient of those services.

 The person responsible for paying GST on freight for commodities transported by road in goods carriage in the taxable territory is now the beneficiary of services for this notification.

Billing for GTA

A GTA's GST compliant invoice must include the following information:

  • Complete details about the products that were transported
  • The consignor and consignee's names
  • The GTA's name, address, and Goods and Services Tax Identification Number (GSTIN) 
  • Registration number of vehicles in which the goods are transported
  • The consignment's total weight
  • Complete information about the origin and destination
  • GSTIN of the person responsible for paying tax, whether as a consignor, consignee, or products transportation agency.
  • Tax invoice number
  • Date of issue
  • Tax amount
  • Service description
  • Supply's taxable value
  • GST rate that applies
  • Details of RCM on GST
  • The supplier's signature

Place of Supply In GTA

When services are supplied to a registered individual, the place of supply is that person's location. If services are delivered to someone who isn't a registered person, the supply site will be where the commodities are turned over for transportation.

What kind of records and accounts does GTA have to keep track of?

Every transporter is expected to keep records of the consignor, consignee, their GSTIN, as that were used to transport, deliver, and keep goods in transit as well as other essential details of the goods in a regulated manner, under section 35(2) of the CGST Act, 2017. The transporter being registered or not makes no difference in this case.

Also Read: Impact of GST Rate on Furniture Manufacturers

Conclusion

The above article demonstrates that not all transportation of goods and services done by road is carried out by a GTA. To qualify as GTA services, the GTA must issue a consignment note. GST applies to the services supplied by a GTA, which are described above in this article. Therefore, having adequate information regarding GST on transport services is necessary for the transportation of goods or services via road. We hope this article has provided you with a clear understanding of the GST rate on GTA and the RCM on GTA.

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FAQs

1. Is GST registration required for a GTA?

If a GTA exclusively delivers products where the recipient must pay the complete tax as per the reverse charge mechanism, they do not need to register under GST. To find out more about the GST on GTA and RCM on transportation, please read the complete article.

2. What is the GST rate for transportation?

The Goods Transport Agency is taxed at two different rates and the GTA under GST depends on ITC availability. GST might be charged at a rate of 5% or 12% by the goods transport agency. The transport GST rate for the GTA will be 5%, and the GTA will not be allowed to claim input tax credits on commodities and services used in providing services. Transportation GST Rate for GTA will be 12%, provided that those who want to pay tax would be required to pay the identified GST rate on goods transport agencies under the forward charge method.

3. What is the GST on freight charges?

The GST tax for transportation services is 5% if the freight is exclusive & individually invoiced. Transportation of certain vital items, on the other hand, is exempt from GST. Whether or not freight forwarding is subject to GST depends on whether the shipment is domestic or international.

4. Person A enlisted the help of a GTA to transport his items. The amount charged for the consideration was Rs.2200. Is the person going to pay the GST?

Since the single carriage exceeds Rs.1,500, Person A will be subject to GST under RCM.

5. What services are excluded from the GST?

The services and items that are excluded from GST are as follows. 

  • Agricultural produce
  • Food, fruits and vegetables, meat and fish
  • Defence or military equipment
  • Raw materials
  • Tools/Instruments

6. What is a Consignment Note?

A consignment note is a letter produced by a GTA when items are received to be transported by road in a goods carriage. Consignment note includes all relevant details. To know more, please read the given article.

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