RCM Liability on Freight charges

[Manjunath S]

Dear Sir,

We used to send Auto/Tempo to pickup Materials from Transporters like Mahalingesh, Patel Roadways, TCI, VRL Etc. Driver will pickup the material and deliver to us, so that we will pay his freight ₹ 1000/- per day.

Our Quiry is,

Will this freight charges attract RCM Liability ? No Invoice will be provided by him.

Kindly guide.

Manjunath S

[KASTURI SETHI]

Under RCM liability to be discharged by the service receiver. See Section 31 (3) (f) & (g) of CGST Act. Self-invoice is to be raised by the receiver of service. Tax is to be paid in cash by you. Who bears the freight charges will pay tax.

[YAGAY andSUN]

GTA services to an unregistered person is exempted as per Notification No. 32/2017- Central Tax (Rate) dated 13th October 2017. However, this notification was cancelled as of 31st Dec 2018 and hence, tax must be paid under RCM for unregistered purchases on the notified list of supplies. However, the list is yet to be notified.

[Rachit Agarwal]

In my opinion there is no requirement to pay tax under reverse charge where is no issue of consignment note. Specific Exemption has been provided under Notification no- 12/2017 dated 28.06.2017

by the entry at s. no. 18 of notification no. 12/2017-Central Tax (Rate), which is exempt from GST.

Services by way of transportation of goods-

(a) by road except the services of-

(i) a goods transportation agency;

If there is no issue of consignment note there is no requirement to pay tax.

CESTAT, West Zonal Bench, Mumbai in case of C.C.C.E. & S.T Raigad Vs JWC Logistics Pvt Ltd. = 2018 (5) TMI 1131 - CESTAT MUMBAI The respondent were engaged in providing Cargo Handling Services and has availed the transportation services. The transporter issued the monthly bills and no consignment note was issued. Held that liability to pay service tax does not arise on the transportation of goods but on the services rendered by GTA in relation to transportation of goods. Held further monthly bills (Invoice) cannot be equated with consignment notes. Invoice creates liability of debt on part of recipient of service while consignment note creates the responsibility for safe delivery at stipulated destination for each consignment.

Significance of Consignment Note-

CBEC Flyer No- 38 dated 01.01.2018- 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.

[KASTURI SETHI]

Non-issuance of consignment note cannot be adopted as modus operandi.Consignment note has neither been defined in the Act nor in the notification no.12/17-CT(R) dated 28.6.17.

Goods Transport Agency service - Co-operative Sugar Mills receiving services of individual truck owners for transportation of sugarcane from Cane Collection Centers to their sugar factory, liable to pay Service Tax though such truck owners issued bill and not consignment note for transportation charges

The Supreme Court Bench comprising Hon’ble Mr. Justice S.A. Bobde and Hon’ble Mr. Justice Deepak Gupta on 4-1-2019 after condoning the delay dismissed the Special Leave Petition (Civil) Diary No. 27143 of 2018 filed by Kisan Sahkari Chini Mills Ltd. = 2019 (1) TMI 1679 - SC ORDER against the Judgment and Order dated 7-3-2017 of Allahabad High Court Bench at Lucknow in Central Excise Appeal No. 23 of 2014 as reported in 2019 (29) G.S.T.L. 292 (All.) (Commissioner v. Kisan Sahkari Chini Mills Ltd.) = 2017 (3) TMI 1786 - ALLAHABAD HIGH COURT. While dismissing the petition, the Supreme Court passed the following order :

“Delay condoned.

The special leave petition is dismissed.

As a sequel to the above, pending interlocutory applications, if any, stand disposed of.”

The Allahabad High Court in its impugned order had held that even though the individual truck owners had issued only bills for transportation charges and not consignment note, the Co-operative Sugar Factory was still liable to pay Service Tax as recipient of the Goods Transportation Agency’s services provided by such individual truck owners for transportation of sugarcane from Collection Centers to their sugar factory.

[Kisan Sahkari Chini Mills Ltd. v. Commissioner - 2019 (29) G.S.T.L. J71 (S.C. = 2019 (1) TMI 1679 - SC ORDER

[Rachit Agarwal]

During the Service Tax Regime there was no specific exemption for transportation of goods by road where consignment note was not issued.

Notification no- 12/2017 dated 28.06.2017

Sr. No. 18 of notification no. 12/2017-Central Tax (Rate), which is exempt from GST.

Services by way of transportation of goods-

(a) by road except the services of-

(i) a goods transportation agency;

If the intention of the Legislature is such that to levy the tax merely on transportation, then exemption provided in the Notification would be of no significance.

Apex Court has merely dismissed the Petition. Dismissal of Petition could not be treated as pronoucement.

[Ganeshan Kalyani]

In the case of IN RE: M/S. K.M. TRANS LOGISTICS PRIVATE LIMITED [2019 (10) TMI 668 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN] the Authority for Advance Ruling and Appellate Authority for Advance Ruling = 2020 (4) TMI 668 - APPELLATE AUTHORITY FOR ADVANCE RULING RAJASTHAN has ruled that the transport service provided on the basis of invoice and e-way bill but without issuance of a consignment note will still be covered as GTA service. Read my article @ https://www.taxtmi.com/article/detailed?id=9117.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

I humbly express my thanks to you for your timely intervention.

[Manjunath S]

Thanks for your guidelines experts.

[KASTURI SETHI]

Regarding purchases from unregistered persons reply against Issue ID No.116176 dated 31.3.2020 in this forum may also be seen.

[YAGAY andSUN]

In nut shell GST is payable on such transactions as nicely enumerated by our experts via healthy discussions on this matter.

[KASTURI SETHI]

M/s.Yagay and Sun,

Dear Sir, I am thankful to you for your in-depth study of the issue.

[CSSANJAY MALHOTRA]

I standy with Mr. Rachit Aggarwal in this case. No need for me to add further. One should deeply review the exemption why it has been given in GST and not in Service Tax. Case laws cited of Service tax would not have any importance if the issue is rightly understood.

[CSSANJAY MALHOTRA]

Please read " I standby" .

[kirankumar bayyavarapu]

I support to Mr. Rachit Aggarwal in this case. Mere Advance authority ruling cannot ovveride the GST Act.

The Act clearly provided the exemptions in transportation Services by way of transportation of goods are exempted:

(a) by road except 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 continue to be exempt even under the GST regime. GST is applicable only on goods transport agency, GTA.

[KASTURI SETHI]

Form 2.1 ( in style of bilty) can be considered as a consignment note.- AAR, Uttarakhand reported as 2020 (38) GSTL. 269 (AAR-GST-UK) = 2020 (6) TMI 520 - AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND in the case of Uttarakhand Forest Development Corporation. Decided on 28.5.20.

[KrishnaIyer Mani]

I am of the opinion that the decision rendered by Hon'ble High Court of Allahabad Central Excise Appeal No. 23 of 2014 as reported in 2019 (29) G.S.T.L. 292 (All.) (Commissioner v. Kisan Sahkari Chini Mills Ltd.) = 2017 (3) TMI 1786 - ALLAHABAD HIGH COURT later on confirmed by Hon'ble Supreme Court in the case of Special Leave Petition (Civil) Diary No. 27143 of 2018 filed by Kisan Sahkari Chini Mills Ltd. = 2019 (1) TMI 1679 - SC ORDER, may have to be considered as per per incuriam for the reasons that the speeches of Hon'ble Finance Minister in the floor of the House was not taken into consideration. It is well settled when two views are possible, reference can be made to the speech of the Hon'ble Finance Minister. Refer the case of K.P. Varghese. This is my personal opinion.

[Anand Nair]

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.

By. "by what ever name called" did they mean invoice raised by GTA.

Lorry receipt and consignment notes are the same?

[KASTURI SETHI]

Lorry Receipt, Goods Receipt, Bilti and Consignment Note all are same or at par. The purpose of all receipts is same i. e. Transporter takes responsibility to deliver the goods to the destination. By "whatever name called" means other than consignment note and those are at par.

AI Summary

Reverse charge on transport services depends on GTA classification and consignment note status, affecting receiver's self invoice obligation. Reverse charge liability on freight depends on whether the transport service is that of a Goods Transport Agency; the receiver must self invoice and pay tax where GTA services are taxable. Issuance of a consignment note (or equivalent lorry receipt/bilti) indicates GTA status and attracts GST under reverse charge, while absence of a consignment note has been argued to render individual transporter services exempt under the road transportation notification. Conflicting judicial and advance ruling authorities mean assessment must consider consignment documentation, transporter classification, and applicable notifications.