Transportation Of Goods Under GST – Specific Taxability Issues

Transportation Of Goods Under GST – Specific Taxability Issues

Goods Transportation is in itself a very wide industry with its own complications especially when it comes to its taxability under GST. So the process is simple: GTA as a supplier is engaged in providing transport services to customers. Such GTA may have its own vehicles or they might sometimes take them on hire or a rental basis as per the requirement. Not just transportation by road, there are other means of transportation like the seaway or by air. So in all such cases, there always exists confusion on how to tax such supplies? Whether such supplies fall under forwarding charge or reverse charge mechanism? At what rate it should be taxable or who can avail the credit of such tax paid. So this write-up contains some of those specific cases and their implications.

CA Shaifaly Girdharwal

Meaning Of Goods Transport Agency (GTA)

N/N 11/2017 defines GTA, which means any person who provides service to transport goods by road and issues consignment notes, by whatever name is called.

What is a consignment note? When goods are transported, A document is issued. The transporter carries this document and hands it to the recipient and confirms the delivery. There is no fixed format for the consignment note. But any receipt or paper carried by the transporter can be considered as a consignment. In some transactions when the owner of a vehicle drives it or in the case of local supplies, the movement may be without a consignment.

What Service Of Transportation Of Goods Is Exempted?

Yes, but the transportation of goods by a goods transport agency is a taxable service.

(a) by road except for the services of:

(i) a goods transportation agency;

(ii) a courier agency

(b) by inland waterways.

Therefore, the service of transportation of goods by road continues to be exempt even under the GST regime. GST is applicable only to goods transport agencies, GTA.

Also, there is no tax liability for GTA up to a certain limit. Two categories have been prescribed:

FIRST CATEGORY-SINGLE CARRIAGE (RS.1500/-)

The first situation is where consignments are transported in a single carriage and the total freight for the single carriage (multiple consignment notes or multiple consignees in a single carriage) does not exceed Rs. 1500/- in total. In such cases, there is an exemption from GST.

When there are multiple loads

When the amount of transportation is less than Rs. 750 in case of multiple loads. The transaction is exempted.

CASE I 

As discussed in the above picture, TATA motors have given a truck to a GTA, and that GTA uses such a vehicle in making his outward taxable supply by making transportation of goods for its customer, the recipient. Now, In the Ist leg, there are two main possibilities, either TATA motors have given such vehicle to GTA on:

  • Hire or
  • Rental basis

Where A Vehicle Is Sent On Hire Basis:

  • The first leg of supply is between TATA motors and GTA. It is pertinent to note here that it is not a GTA service that has taken place.
  •  It’s simply a vehicle supplied on a hire basis. Such a supply is covered under a forward charge mechanism whereby TATA motors are liable to pay taxes.
  • But in this particular case, no taxability shall arise on the supplier because the Hiring of a motor vehicle to GTA has been specifically exempted by the government under heading no. 9966/9973. 

Where A Vehicle Is Sent On A Rental Basis:

  • Again, as discussed this supply is also covered under a forwarding charge basis whereby TATA motors shall be liable to pay tax @ a prescribed rate of 18%.
  • It is important to understand that there is a difference between the supply of vehicles on hiring Vs supply of vehicles on a rental basis, both are two different terms and so as their treatment.
  • The taxability of such supplies completely depends upon the type of agreement entered. So one has to be very careful while drafting an agreement.

The 2nd leg of the supply is between GTA and its Recipient. The following are the relevant points in this regard:

  • Now, this supply is a GTA service.
  • An input tax credit of tax paid by GTA (where the vehicle is taken on rent) shall be available only if GTA has opted to pay tax @ 12% under the forwarding charge mechanism.
  • But if GTA opts for a 5% rate, the reverse charge mechanism shall apply and consequently, no input shall be allowed which will resultantly increase the cost of GTA.

CASE II

Suppose in the above case, GTA has been approached by the recipient to transport Agricultural Produce from one place to another. What are the implications? No taxability shall arise on transportation services by GTA since agricultural produce has been specifically exempted by a notification.

Q: What if this agricultural produce is little processed and tagged up with a “Brand” which is now taxable @ 5%?

A: It will still not be taxable because these goods are still in the nature of agricultural produce and mere tagging of a brand name will not change its substance. Maybe it is taxable @ 5% but its nature is still agricultural produce and thus no liability to pay tax shall arise.

CASE III

In continuation of the above, another possibility is that the goods being transported are the ones that are NIL rated. Will there be any liability to pay tax in this case for a reason that goods being transported are nil rated?

So the answer to this question will be Yes. There is a difference between exemption for services and exempted goods. Exemption of goods (i.e exempted goods) are given under N/n 2/2017- CTR.

Whereas if we refer to the exemption of services, services of GTA have been exempted specifically when goods being transported are ‘Agricultural Produce’.

Thus, even if the goods being transported are exempted, there is a liability to pay tax under RCM/FCM on transportation services as the case may be.

CASE IV

As represented in the above diagram, the exporter in India has availed services of a shipping line for the export of goods to his customer located in country Australia. Now, a question arises that is there any applicability of tax on transportation services and if so can the exporter claim the credit of tax paid on shipping services availed?

In order to understand this scenario, first refer to section 12(8) of the IGST Act, 2017.

The said section provides that where goods are transported outside India, the place of supply shall also be outside India. It seems that the intention of the government is to promote export by keeping such supply outside the scope of taxability.

But interestingly, this supply of transportation services is not covered under the definition of export of services for the simple reason that the recipient is located in India and the consideration paid will always be paid in INR. Thus, failing to qualify as export of services.

So, one can certainly conclude that IGST is leviable on such supply. But another question that stands before is, which state should get the portion of IGST charged since the goods are not destined to any Indian state. They are delivered outside India and so the SGST component of IGST is not specific.

For these specific supplies, the supplier can deposit the SGST component of IGST under the head “other territory tax”. An input tax credit of the tax paid can be claimed by the exporter validly since IGST Act in itself does not bar claiming credit merely for the reason that credit can be claimed from that state only to whom tax is paid.

What Are The Returns To Be Filed By A Gta?


Two possibilities:

  1. All services of GTA fall under RCM- there is no need for registration thus the question of filing a return does not arise.
  2. But if they are making some other supplies also, They may take registration.
  3. They can also choose to pay tax on the forwarding charge @12%.
  4. If GTA is registered- 3 monthly returns are to be filed – GSTR 1 for sales, GSTR 2 for purchases, and GSTR 3 for monthly and summary tax liability. But since GSTR 2 and 3 are not available yet, GSTR 3B has to be filed.
  5. In GSTR 3b there is no space to show their supplies. They can show it in exempt and file correct details in GSTR 1.

About CA Shaifaly Girdharwal

CA Shaifaly Girdharwal is a qualified chartered accountant practicing in GST. She is the co-founder of ConsultEase.Com and a famous YouTuber with more than 2,40,000 subscribers for her channel dedicated to the GST videos. She is also a trainer and author. She has written a book on GST for Taxmann Ltd.

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