Background of levying tax on the services of Goods Transport
Agency
The levy of Service Tax on Road Transportation Service has always been
a contentious issue. The Finance Act, 1997 had levied Service Tax on Goods
Transport Operators w.e.f. 16-11-1997 which was subsequently withdrawn after
nation-wide strike. Thereafter by the Finance (No. 2) Act, 2004 Service Tax was
imposed on Transport of Goods by Road service rendered by a goods transport
agency with effect from 10-09-2004. However, the levy was deferred until
further notice again in view of transporters’ strike. The Government thereafter
constituted a Committee to deal with the issue and after taking into account
the recommendations of the Committee, Notification Nos. 32 to 35/2004 – ST all
dated 03-12-2004 were issued, levying tax on Transport of Goods by Road with
effect from 01-01-2005.
The legal
position prevailing under Service Tax is being continued under the GST regime.
The services of transportation of goods by road (except services of GTA)
continue to be exempt even under the GST regime. In so far as the services of
GTA is concerned, if the services (of Goods Transportation) are provided (by
the GTA) to specified classes of persons, the tax liability falls on such
recipients under the reverse charge mechanism. The following discussion will
clarifythe position.
Transportation of Goods by Road
In terms
of Notification no. 12/2017-Central Tax (Rate) dated 28.06.2017 (sr.no.18), the
following services are exempt from GST
Services by
way of transportation of goods (Heading 9965):
(a)
by road except the services of:
(i)
a goods transportation agency;
(ii)
a courier agency;
(b)
by inland waterways.
Thus, it
is to be seen that mere transportation of goods by road, unless it is a service
rendered by a goods transportation agency, is exempt from GST.
Who is a GTA – Goods Transport
Agency?
As per
Section 65B (26) of the Finance Act, 1994; “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”. Therefore, in the Service
Tax regime, issuance of Consignment Note (C/N) was integral and mandatory
requirement before any road transporter could be brought within the ambit of
GTA.
Position under GST
Under GST
laws, the definition of Goods Transport Agency is provided in clause (ze) of
notification no.12/2017-Central Tax (Rate) dated 28.06.2017.
(ze) “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;
Thus, it can
be seen that issuance of a consignment note is the sine-qua-non for a
supplierof service to be considered as a Goods Transport Agency. If such a
consignment note is not issued by the transporter, the service provider will
not come within the ambit of goods transport agency. 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 to the consignee. It is
only the services of such GTA, who assumes agency functions, that is being
brought into the GST net. Individual truck/tempo operators who do not issue any
consignment note are not covered within the meaning of the term GTA. As a
corollary, the services provided by such individual transporters who do not
issue a consignment note will be covered by the entry at s.no.18 of
notification no.12/2017-Central Tax (Rate), which is exempt from GST.
What is a consignment note
Consignment
Note is neither defined in the Act nor in the notification no.12/2017-Central
Tax (Rate). Guidance can be taken from the meaning ascribed to the term under
the Explanation to Rule 4B of Service Tax Rules, 1994. In terms of the said
rule, consignment note means 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 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 for paying service tax whether
consignor, consignee or the goods transport agency.
Charge of GST on services
provided by GTA
In terms of
notification no. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by
notification no. 20/2017- Central tax (Rate) dated 22.08.2017 , sr.no. 9 and
sr. no. 11, (i) Services of goods transport agency (GTA) in relation to
transportation of goods (including used household goods for personal use)
(Heading 9965 &9967 respectively) attracts GST @2.5% or 6% CGST. Identical
rate would be applicable for SGST also, taking the effective rate to 5% or 12%.
However, the rate of 5% is subject to the condition that credit of input tax
charged on goods or services used in supplying the service has not been taken.
The Explanation to the notification further clarifies that it shall mean that,-
(a) credit of input tax charged on goods or services used exclusively in
supplying such service has not been taken; and (b) credit of input tax charged
on goods or services used partly for supplying such service and partly for
effecting other supplies eligible for input tax credits, is reversed as if
supply of such service is an exempt supply and attracts provisions of
sub-section (2) of section 17 of the Central Goods and Services Tax Act, 2017
and the rules made there under.
GST @ 6% CGST
(12% cumulative) is subject to the condition that the goods transport agency
opting to pay central tax @ 6% under this entry shall, thenceforth, be liable
to pay central tax 6% on all the services of GTA supplied by it. Further, there
is no restriction on the GTA from taking ITC if this option is availed.
Thus, where
the GTA is not eligible to take ITC for the supplies effected by it and the
liability under GST is discharged under reverse charge basis, the recipient of
GTA service discharging the tax liability is entitled to take Input Tax Credit
(ITC) of the amount of tax paid under reverse charge, provided it is used in
the course or furtherance of business at his end. Further the recipient would
be eligible for ITC of the GST paid by GTA on forward charge basis.
Notification no. 11/2017-Central Tax (Rate), sr.no.11, (ii) also provides that
supporting services in transport other than those mentioned in (i) (Heading
9967) would attractGST @9% CGST. Identical rate would be applicable for SGST
also, taking the effective rate to 18%. Similar rate has been prescribed for
services falling under heading 9965 in terms of notification no.
11/2017-Central Tax (Rate), sr.no. 9 (v).
Person Liable to Pay GST on GTA
services
The
liability to pay GST devolves on the recipientsfor supply of services by a
goods transport agency (GTA)who has not paid central tax at the rate of 6%, in
respect of transportation of goods by road(in terms of notification no.
13/2017-Central Tax (Rate) dated 28.06.2017 (sr.no.1) as amended by
notification no. 22/2017-Central Tax (Rate) dated 22.08.2017, if the recipients
(located in the taxable territory)belong to the following category:
(a)
Any factory registered under or governed by
the Factories Act, 1948(63 of 1948); or
(b)
any society
registered under the Societies Registration Act, 1860 (21 of 1860) or under any
other law for the time being in force
in
any part of India; or
(c)
any co-operative society established by or
under any law; or
(d)
any person
registered under the Central Goods and Services Tax Act or the Integrated Goods
and Services Tax Act or the State
Goods
and Services Tax Act or theUnion Territory Goods and Services Tax Act; or
(e)
any body corporate established, by or under
any law; or
(f) any
partnership firm whether registered or not under any law including association
of persons; or
(g)
any casual taxable person.
Thus in cases where services of GTA are availed by the above
categories of persons in the taxable territory the GTA supplier has the option
to pay tax (and avail ITC) @12% (6% CGST + 6% SGST);and if the GTA does not
avail this option, the liability to pay GST will fall on the recipients. In all
other cases where the recipients do not fall in the categories mentioned above,
the liability will be on the supplierof GTA services.
GTA
services specifically exempt
In terms of notification no.12/2017-Central Tax (Rate) dated
28.06.2017 (sr.no.21), the following services provided by a GTA (Heading 9965
or 9967) is exempt from payment of tax:
Services provided by a goods transport agency, by way of transport in
a goods carriage of:
(a)
agricultural produce;
(b)
goods, where
consideration charged for the transportation of goods on a consignment
transported in a single carriage does not
exceed one thousand
five hundred rupees;
(c)
goods, where
consideration charged for transportation of all such goods for a single
consignee does not exceed rupees seven
hundred and fifty;
(d)
milk, salt and food grain including flour,
pulses and rice;
(e)
organic manure;
(f) newspaper
or magazines registered with the Registrar of Newspapers;
(g)
relief
materials meant for victims of natural or man-made disasters, calamities,
accidents or mishap; or
(h)
defence or military equipments.
Similarly,
the following services received by the GTA (Heading 9966 or 9973) is also
exempt in terms of notification no.12/2017-Central Tax (Rate) dated 28.06.2017
(sr.no.22) Services by way of giving on hire :
(b)
to a goods
transport agency, a means of transportation of goods.
Thus, if
the GTA hires a means of transportation of goods, no GST is payable on such
transactions.
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. It includes not only the actual
transportation of goods, but any intermediate/ancillary service provided in
relation to such transportation, like loading/unloading, packing/ unpacking,
trans-shipment, temporary warehousing, etc. If these services are not provided
as independent activities but are the means for successful provision of GTA
Service, then they are also covered under GTA.
Conclusion
The above
discussion shows that not all transport of goods by road is by a GTA. To
qualify as services of GTA, the GTA should be necessarilyissuing a consignment
note. Only services provided by a GTA are taxable under GST. Services of
transportation of goods by a person other than GTA are exempt. Moreover, in
cases where the service of GTA is availed by the specified categories of
persons in the taxable territory, the recipients who avail such services are
the ones liable to pay GST and not the supplier of services unless the GTA opts
for collecting and paying taxes @ 12% (6% CGST + 6% SGST). In all other cases
where GTA service is availed by persons other than those specified, the GTA
service supplieris the person liable to pay GST. The GTA service supplieris not
entitled to take ITC on input services availed by him if tax is being charged @
5% (2.5% CGST + 2.5% SGST). In case the GTA service supplierhires any means of
transport to provide his output service, no GST is payable on such inputs.
In a
nutshell, the GST law continues the provisions prevailing under the Service Tax
regime. The law recognises that pure transportation of goods services are
mostly provided by persons in the unorganised sector and hence has specifically
excluded such operators from the tax net. In respect of those who provide
agency services in transport, the liability is cast on the recipients in most
of the cases or unless option to pay under forward charge has been exercised by
the GTA. 
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