GST on Goods Transport Agency (GTA)

GST on Goods Transport Agency (GTA)

Applicability of GST on transport

Notification No. 12-2017 dated 28th June 2017 exempts the “Service by way of transportation of goods

• by road except the services of
  • Goods Transport Agency and
  • courier agency.
• by inland waterways."

In simple words, GST will apply to the service of transportation of goods by road only if services are provided by GTA or courier agency. It is relevant to note that services provided by GTA include not only transportation services but also other ancillary services such as loading, unloading, packing, transshipment, etc.

What is a Goods Transport Agency (GTA)?

As per Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017, “goods transport agency” or GTA means any person who:

• provides service in relation to transport of goods by road and
• issues consignment note, by whatever name called.

This means any supplier of service will be considered as GTA only when he engaged in the services of transportation of goods by road and issues consignment note. If the consignment note is not issued by the transporter, he will not come within the ambit of GTA.

Further, the services provided by transporters who do not issue consignment note are exempt from GST. (Entry no. 18 of exemption Notification No.12/2017) 

Contents of a consignment note

Consignment note means a document, issued by a GTA 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
• gross weight of the consignment
• GSTIN of the person liable for paying service tax whether consignor, consignee or GTA

Read more: Consignment note under GST

When do GTA services get covered under reverse charge (RCM)?

Under reverse charge mechanism (RCM), the recipient of goods or services is liable to pay tax and all GST compliances shall applicable to him as he is a person who is liable to pay tax.

If GTA services are availed by the following categories of persons in the taxable territory, the service recipient will liable to pay GST on a reverse charge basis.

• any factory registered under the Factories Act, 1948
• any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India
• any co-operative society established by or under any law
• any person registered GST
• any-body corporate established by or under any law
• any partnership firm whether registered or not under any law including association of persons
• any casual taxable person

In all other cases, where the recipient does not fall in the categories mentioned above, the GST liability will be on the GTA agency.

GST rate and input tax credit

When GTA is liable to pay GST, GTA can exercise any of the following two options at the beginning of the year-

Option 1: Pay 5% GST and input tax credit cannot be availed

Or

Option 2: Pay 12% GST and input tax credit can be availed 

GTA who are having their own vehicles and having huge input tax credit on capital goods may find option 2 (Pay 12% GST with ITC) beneficial.

Where tax liability on GTA services is discharged by the recipient under reverse charge mechanism, the recipient is entitled to take credit of the amount of tax paid if it is used in the course or furtherance of business at his end.

Exemptions available to Goods Transport Agency under GST

Services provided by GTA in relation to the following items are exempted from GST –

(a) Agriculture produce;

(b) Goods where transport charges for single carriage do not exceed Rs 500;

(c) Goods where transport charges for all such goods for a single consignee do not exceed Rs 750;

(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 for victims of naturals or manmade disasters;

(h) Defense or military equipment

Accounts & records to be maintained by GTA under GST

As per section 35(2) of CGST Act 2017, every transporter, irrespective of whether he is a registered person or not, shall maintain records of the consigner, consignee, and other relevant details of the goods in such manner as may be prescribed.

Further, as per rule 56 of the CGST Rules 2017, transporters are required to maintain records of goods transported, delivered, and goods stored in transit along with the GSTIN of the registered consigner and consignee.

GST composition scheme

A composition scheme is an optional scheme of levy of tax available for small taxpayers in the GST regime. Earlier, the scheme was available to only the suppliers of goods. However, notification no 2/2019-Central Tax (Rate) notified the composition scheme for the supplier of service also from 1 April 2019. Under this scheme, tax is levied at a reduced rate with fewer GST compliances.

Service providers having an annual turnover of less than Rs 50 lakhs can opt for a composition scheme in GST. Goods Transport agencies opting for a composition scheme are required to pay GST at a rate of 6% subject to certain conditions & restrictions.

Keep Reading: Composition scheme under gst