2020 (7) TMI 78 - AAR - GST

GST Rates for Transportation Services: Input Tax Credit, Tax Options, and Procedural Concerns

The services provided by the applicant are classified under Heading 996511. The applicable GST rate is 5% if input tax credit is not taken and 12% if the ... Goods Transport Agency (GTA) - consignment note - classification under SAC 996511 - eligibility for input tax credit (ITC) - forward charge mechanism - reverse charge mechanism - condition of non-availment of input tax credit for concessional GTA rateGoods Transport Agency (GTA) - classification under SAC 996511 - consignment note - Classification of the applicant's services where the applicant issues the consignment note but actual transportation is performed by a third-party transporter - HELD THAT: - The Authority found on the facts that the applicant provides services in relation to transportation of goods by road to POSCO group companies and issues consignment notes which are stamped by the receiver on delivery. Applying the explanatory notes to the scheme of classification and the definition of 'GTA' in the relevant notification, the Authority concluded that issuance of consignment notes together with provision of road-transport related services brings the activity within the concept of a Goods Transport Agency. Consequently the services fall under the Goods Transport Services heading and, more particularly, within SAC/Heading 996511 (road transport services of goods). The Authority relied on the nature of services actually rendered and the issuance/acknowledgement of consignment notes to reach this classification.Services supplied by the applicant are covered under Heading 996511.Forward charge mechanism - condition of non-availment of input tax credit for concessional GTA rate - classification under SAC 996511 - Applicable GST rate on the applicant's services classified under SAC 996511 - HELD THAT: - Having held that the services fall under SAC 996511, the Authority applied the entries in the relevant rate notification dealing with Goods Transport Agency services. The Authority explained the two alternatives available under the notification for GTA supplies: a concessional effective rate (subject to non availment/ reversal of input tax credit as prescribed in the notification) or payment of tax under the forward charge option enabling availment of ITC subject to Chapter V of the CGST Act. Accordingly, the Authority concluded that Entry 9(iii) of the rate notification applies: an effective lower rate (5% as provided in the notification) is available provided the condition of non availment/reversal of input tax credit is satisfied; alternatively, the GTA may opt to discharge tax at the specified rate under forward charge (12% as framed in the order) and thereafter be eligible to claim ITC subject to statutory conditions.GST for the applicant's services is governed by Entry 9(iii) of the rate notification: a concessional rate subject to non availment/reversal of ITC, or otherwise the forward charge rate with entitlement to ITC subject to Chapter V conditions.Eligibility for input tax credit (ITC) - third-party transporter - forward charge mechanism - Whether the applicant is entitled to claim ITC of GST charged by third-party transporters - HELD THAT: - The Authority noted that entitlement to ITC depends on tax having been paid by the supplier and compliance with Chapter V conditions. On the material before it, the Authority observed that third party transporters supplying services to the applicant were, prima facie, classifying their supplies under the notification entry for hiring of vehicles and were not charging GST to the applicant (i.e., no tax was paid). Because no GST was paid by those third party transporters on the supplies to the applicant, the applicant cannot claim ITC in respect of those supplies. The Authority's conclusion is therefore fact sensitive and rests on the recorded position that no GST was charged by the third parties.Applicant cannot avail ITC in respect of services of third party transporters where those transporters have not charged and paid GST.Forward charge mechanism - Goods Transport Agency (GTA) - Whether a transporter may charge GST @12% under forward charge to the applicant when the applicant as main contractor is already charging GST @12% (question on another supplier's chargeability) - HELD THAT: - The Authority declined to answer this query because it did not pertain to supplies undertaken by the applicant and therefore fell outside the scope of matters on which an advance ruling may be given under the governing statute. No adjudication on the substantive question was therefore made by this Authority.Question not answered by the Authority.Goods Transport Agency (GTA) - consignment note - procedural correctness - Procedural correctness of having two GTA service providers and two consignment notes for the same movement of goods (one by the applicant and one by the sub contracted transporter) - HELD THAT: - The Authority observed that the question is procedural in nature and does not fall within the scope of matters enumerated for advance rulings under the statute. Consequently, the Authority refrained from answering this procedural question and made no determination on whether simultaneous issuance of two consignment notes or dual GTA status for the same movement is correct.Question not answered by the Authority.Final Conclusion: The Authority ruled that the applicant's services are taxable as Goods Transport Services under SAC/Heading 996511 and that Entry 9(iii) of the rate notification applies (concessional treatment if the prescribed non availment/reversal of ITC condition is satisfied, otherwise tax under forward charge with ITC subject to Chapter V). The applicant cannot claim ITC for supplies by third party transporters where those transporters have not charged GST. Two questions concerning another supplier's charging of tax and procedural correctness of dual consignment notes were not answered by the Authority. Issues Involved:1. Classification of services when the applicant issues consignment notes but actual transportation is done by a third-party transporter.2. Applicable GST rate on the services provided by the applicant.3. Eligibility of the applicant to avail input tax credit for the GST charged by third-party transporters.4. Validity of the transporter charging GST under the forward charge mechanism when the applicant is already charging GST.5. Procedural correctness of having two GTA service providers and two consignment notes for the same movement of goods.Issue-Wise Detailed Analysis:1. Classification of Services:The applicant provides logistics solutions and issues consignment notes while actual transportation is done by third-party transporters. The service classification falls under Heading 996511, which covers '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.' The applicant qualifies as a Goods Transport Agency (GTA) because they provide services in relation to the transportation of goods by road and issue consignment notes.2. Applicable GST Rate:The services provided by the applicant are covered under Entry 9(iii) of Notification 11/2017(CT) Rate dated 28 June 2017. The GST rate applicable is 5% provided that the credit of input tax charged on goods and services used in supplying the services has not been taken. Alternatively, a GST rate of 12% is applicable if the applicant opts to pay central tax at 6% on all the services of GTA supplied by it.3. Eligibility to Avail Input Tax Credit:The applicant can avail input tax credit if they opt to pay GST at the rate of 12%, subject to satisfying the provisions of Chapter V of the CGST Act, 2017. However, third-party transporters are classifying their services under Entry 22(b) of Notification 12/2017 and are not levying any tax on the services supplied to the applicant. Consequently, the applicant cannot avail input tax credit on services provided by third-party transporters.4. Validity of Transporter Charging GST:The question regarding the validity of the transporter charging GST under the forward charge mechanism when the applicant is already charging GST does not pertain to the supply undertaken by the applicant. Therefore, this authority cannot answer the question as per Section 95 of the CGST Act, 2019.5. Procedural Correctness of Two GTA Service Providers:The question about the procedural correctness of having two GTA service providers and two consignment notes for the same movement of goods does not fall under Section 97(a) to (g) of Section 95 of the CGST Act, 2019. Hence, this authority refrains from answering the said question.Order:Q. No. 1: The services supplied by the applicant are classified under Heading 996511.Q. No. 2: The applicable GST rate is covered under Entry 9(iii) of Notification 11/2017(CT) Rate dated 28 June 2017, with a GST rate of 5% if input tax credit is not taken, and 12% if the applicant opts to pay central tax at 6% on all GTA services supplied.Q. No. 3: The applicant cannot avail input tax credit for services provided by third-party transporters as they are not charging any GST.Q. No. 4: This question is not answered as it does not pertain to the supply undertaken by the applicant.Q. No. 5: This question is not answered as it pertains to procedural correctness, which is outside the scope of Section 97(a) to (g) of Section 95 of the CGST Act, 2019.