1. The most awaited Indirect tax reform, Goods and Services tax (GST) was made effective from 01st July, 2017. GST is aimed at making taxation system Good and Simple. In this article, author tries to analyse the impact of GST on ‘Goods Transportation Agency’ (GTA) service.
2. As per Section 7 of CGST Act, 2017, ‘Supply’ includes all forms of supply of Goods or Services or both made or agreed to be made for consideration by a person in the course or furtherance of business.
Services of GTA is a ‘supply’ of service where freight is the consideration and made by a person in the course of business. Hence, it is ‘supply’ liable to be taxed under GST subject to exemptions.
Taxability of ‘Transport of Goods on Road’ service
3. Entry No. 18 of Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 exempts transportation of goods by road except the services of
|(i)||A goods transport agency|
|(ii)||A courier agency|
What is ‘Goods Transport Agency’?
4. As per definition 2(ze) of the Notification, ‘goods transport agency’ means any person who provides service in relation to transportation of goods by road and issues consignment note, by whatever name called.
What is ‘Consignment Note’?
5. Here, it will be interesting to note the meaning of consignment note and the persons who need to issue a consignment note. In Service Tax Rules, 1994, Explanation to Rule 4B defines ‘consignment note’ to mean a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the names 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 for paying service tax whether consignor, consignee or the goods transport agency.
There are plethora of case laws where the courts, various CESTAT held that “Only persons issuing consignment notes are covered within ‘goods transport agency’; therefore, individual truck owners who do not book cargo and issue consignment note in normal course of business are, prima facie, not goods transport agency and, accordingly, services provided by them are not liable to service tax”
It was observed by CESTAT New Delhi in case of Birla Ready Mix v. Commissioner of Central Excise,  39 STT 257/ 28 taxmann.com 201 that “The mere fact that the operator is doing activity of transportation cannot make the operator a “Goods Transport Agency.” The fact that part of the hire charges for the vehicles is being paid on the basis of number of kilometers run cannot alter the nature of the responsibility of the operators because such payment is consistent with a scheme of hiring the vehicle though it may be consistent with a contract for transportation of goods also. On the other hand a fixed charge per month for the vehicle is more consistent with a scheme of hiring the vehicle rather than a contract for transporting the goods…..…the operator was responsible only for the vehicle and there is no custodial rights or responsibilities in matter of goods carried. This obviates the need to issue consignment notes which normally is a document of title for the goods when it is in the custody of the transporter. Since the appellants are responsible for the goods transported, consignment note, which is a document of title to the goods, is not issued.”
CESTAT, New Delhi in case of Nandganj Sihori Sugar Co. v. Commissioner of Central Excise,  46 GST 570/47 taxmann.com 92 observed that “a consignment note issued by Goods Transport Agency represent its liability to transport the consignment handed over to it to the destination and deliver the same to the consignee and merely a bill issued for transportation of goods cannot be treated as Consignment Note.”
6. Entry 21of Notification no. 12/2017 – Central Tax (Rate) dated 28.06.2017 – Services provided by GTA, by way of transport in a goods carriage of
|(b)||Goods, where consideration charged for transportation of goods on a consignment transported on 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|
|(f)||Newspaper or magazines registered with Registrar of Newspapers|
|(g)||Relief materials for victims of natural or man-made disasters, calamities, accidents or mishap|
|(h)||Defense or Military equipments|
It is important to note the definition of ‘Goods carriage’ as per 2(zd) of above mentioned notification to mean definition assigned to it in Section 2(14) of Motor Vehicles Act, 1988. As per Said section, “goods carriage” means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods.
Entry 22of Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017- Services by way of giving on hire to a GTA, a means of transportation of Goods
Who needs to pay tax?
7. In general, under indirect taxes, tax is collected from the buyer of Goods or receiver of services and the supplier pays to the Government. As per section 9(3) of CGST Act, 2017 is tax shall be payable by recipient under reverse charge in certain notified cases. In this connection, attention needs to be drawn to Notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017 wherein Entry 1 talks of Goods Transport Agency service. As per the said entry,
Nature of Service – Transport of Goods by Road
Service Provider – Goods Transport Agency
Service Recipient – Any of the following:-
|(a)||Any Factory registered under Factories Act, 1948|
|(b)||Any Society registered under Societies Registration Act, 1860 or any other law for time being in force in India|
|(c)||Any Co-operative Society established by or under any law|
|(d)||Any person registered under CGST/SGST/IGST/UTGST|
|(e)||Any body corporate established by or under any law|
|(f)||Any partnership firm whether registered or not including AOP (Association of Persons)|
|(g)||Any Casual Taxable person|
Who needs to pay tax? – Recipient who is liable to pay freight is liable to pay tax under Reverse Charge.
Some of examples:-
|Service Provider||Consignor||Consignee||Person liable to pay Freight||Person liable to pay GST|
|GTA||A Ltd (Whether or not registered under GST)||B & Co (Whether or not registered under GST)||A Ltd||A Ltd|
|GTA||A & Co (Whether or not registered under GST)||X (GSTIN: 37ABCDE1234F1ZQ)||X||X|
|GTA||A Co-Op Society Ltd (Whether or not registered under GST)||X (GSTIN: 37ABCDE1234F1ZQ)||A Co-Op Society Ltd||A Co-Op Society Ltd|
|GTA||A Ltd (Whether or not registered under GST)||B Ltd (Whether or not registered under GST)||B Ltd||B Ltd|
|GTA||A (GSTIN: NA)||V (GSTIN: 36PQRST0987UZ1W)||A||GTA|
|GTA||A (GSTIN: NA)||R (GSTIN: 25ASDFG7654H1ZE)||R||R|
|GTA||A (GSTIN: NA)||S (GSTIN: NA)||S||GTA|
8. Every supplier shall be liable to be registered in the State from where he makes a taxable supply, if his aggregate turnover in a financial year exceeds Rs. 20 Lakhs.
Section 2(6) of CGST Act, 2017 defines Aggregate Turnover to mean Taxable Supplies, Exempt Supplies (Not leviable to tax + Nil rated + Exempt from Tax)
Hence, if a GTA is providing services of transportation of goods by road and having aggregate turnover of more than Rs. 20 Lakhs, they need to get registered under GST.
It is important to refer to Notification No. 5/2017 – Central Tax dated 19.06.2017 wherein the person whose supplies are all taxed under reverse charge as per section 9(3) of CGST Act, 2017 need not register under GST Act considering the provisions of Section 23(2) of CGST Act, 2017.
Therefore, if a GTA is providing services of transportation of Goods to persons listed in the Entry 1 of Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017, then GTA need not register taking shelter of Notification No. 5/2017 – Central Tax dated 19.06.2017.
9. Rule 46 of CGST Rules, 2017 provides for contents of Invoice. Combined reading of Rules 46 and Rule 54(3) of CGST Rules, 2017, GTA shall issue a tax invoice or any other document in lieu thereof, by whatever name called, containing
|♦||Name, Address and GSTIN of GTA|
|♦||Consecutive Serial Number, not exceeding 16 characters, in one or multiple series, containing alphabets, numerals or special characters (‘-‘ or ‘/’) unique for a financial year|
|♦||Date of issue|
|♦||Description of service|
|♦||Taxable Value of Supply|
|♦||Rate of Tax|
|♦||Amount of tax Charged|
|♦||Whether tax is payable in Reverse Charge|
|♦||The gross weight of the consignment,|
|♦||Name of the consigner and the consignee,|
|♦||Registration number of goods carriage in which the goods are transported,|
|♦||Details of goods transported,|
|♦||Details of place of origin and destination,|
|♦||Goods and Services Tax Identification Number of the person liable for paying tax whether as consigner, consignee or goods transport agency|
|♦||Signature or Digital Signature|
Input Tax Credit
10. Coming to Input tax credit, which is the most important advantage of GST; Notification No. 11/2017 – Central Tax (Rate) which notified rate on services; Entry 9 (iii) prescribes rate of 2.5% CGST on GTA Services with a condition that Credit of input tax on goods or services used in supplying the service has not been taken.
This restriction implies that input on goods or services used exclusively for providing GTA services cannot be taken and reversal to extent of GTA turnover when goods/services are used for provision of both taxable and GTA services as per provisions of Section 17 (2) of CGST Act, 2017.
Thus, If GTA is the person who is liable to pay tax, he cannot avail input tax credit on any goods or services used for providing GTA Services.
However, if tax is paid on GTA under Reverse charge as per Section 9(3) of CGST Act, 2017; can the tax paid under reverse charge on GTA Services be taken as ITC? is a question to be discussed. On careful reading of condition in Notification No. 11/2017 – Central tax (Rate) dated 28.06.2017; one can infer that the restriction of ITC is only on goods or services used in supplying the GTA service i.e. in case of reverse charge, the person paying tax will not use any goods or service to supply GTA service since he is a recipient of that service and is made liable to pay tax under reverse charge only and hence tax paid on GTA under reverse charge can be availed as ITC by the person paying the tax.
Also to be kept in mind, the provisions of section 9(4) of CGST Act, 2017 wherein the registered person is liable to pay tax under reverse charge if he receives goods or services from an unregistered person.
If a GTA is obtaining services of unregistered accountant for his accounting works, GTA needs to pay tax under reverse charge on the accountant fees since the accountant is unregistered but cannot avail ITC because the ITC is restricted. Let us take a case where GTA hires vehicles from other persons who own the goods carriage. In this case, since the activity of hiring goods carriage to GTA is exempt as per Notification no. 12/2017 – Central Tax (Rate) dated 28.06.2017, there will be no question of reverse charge and hence no question of eligibility of ITC.
Payment of Tax
11. Tax shall be paid only in cash since no ITC is allowed to be availed. Modes of payment are:-
|♦||Over the Counter payment in case of tax payment up to Rs. 10,000|
12. If 100% of supplies made by GTA are taxed under reverse charge, there is no requirement of registration as per Notification No. 5/2017 – Central Tax dated 19.06.2017 and hence no question of Returns.
Otherwise, GTA shall file 3 monthly returns i.e. GSTR 1 containing the details of outward supplies made during the month to be filed on or before 10th of next month; GSTR 2 containing the details of inward supplies cannot be accepted by GTA since ITC is restricted but to be filed between 11th and 15th of next month and GSTR 3 which is the monthly return to be filed based on GSTR 1 & 2 and tax needs to paid before filing the return.
13. The opening remark of good and simple tax is questionable in case of GTA paying under reverse charge as per Section 9(4) but who is not able to take input because of restriction. However, it will be appreciated that the rate of tax on GTA is at concessional rate of 5% instead of regular rate on services which is 18%.