gst on freight under RCM

[Kavali Ramanjeneyulu]

A taxpayer is paying gst @5% on freight under RCM in terms of Notfn no. 13/2017-CT dt 28.06.2017. As per Notfn No. 11/2017-CT dt 28.06.2017 (s.ni. 9), rate of tax @5% in respect of GTA is applicable provided the credit of input tax charged on goods and services used in supplying the service. In this case, the queries are put forth for clarification pl.

How to ascertain whether the supplier has taken credit on the goods and services used in supplying the service

Is there any requirement of giving declaration by the GTA regarding non availement of ITC on goods and services used in supplying service

If the supplier has taken credit on the goods and services used in supplying the service, whether the recipient is eligible for concessional rate of 5% tax or he has to pay tax @18%.

[KASTURI SETHI]

GTA supplier will avail ITC only if he opts for GST@12% (6%+6%) and he will issue invoice charging @12%. In that situation, the recipient is not liable to pay tax @5% under RCM. It is effective from 22.8.2017 vide Notification No. 20/2017-C.T. (Rate), dated 22-8-2017 Para No.(v) refers. As per this notification, if GTA wants to pay @12% , he will have to opt for Forward Charge Scheme in the beginning of Financial Year. If he GTA pays tax @12%, he avail ITC otherwise not. GTA cannot adopt hybrid procedure.

The condition of non-availment of ITC is applicable where GTA himself is liable to pay tax and NOT where the recipient is liable to pay tax@5% on reverse charge basis and thus recipient can avail ITC.

The person who pays (bears) freight or liable to pay freight for the transportation of goods by road shall be treated as the person who receives the service as per Notification No.13/17-CT(R) as amended.

Q.Is there any requirement of giving declaration by the GTA regarding non availement of ITC on goods and services used in supplying service ?

Ans. No. Such practice was in force during Service Tax era.

Q. If the supplier has taken credit on the goods and services used in supplying the service, whether the recipient is eligible for concessional rate of 5% tax or he has to pay tax @18%.

Ans. NO. If the supplier opts for FCM, RCM is not applicable.

[KASTURI SETHI]

GTA should give remarks on the invoice, "GST to be paid under RCM".

[PAWAN KUMAR]

Rightly explained sir. Gst law does not require any declaration in this regard unlike service tax law. As per service tax law notification 12/2003-S.tax requires support of documentary evidence, hence there was a practice to mention declarations on consignment notes that gta is not claiming cenvat credit on inputs and capital goods and also not availing benefit under not.no.12/2003-s.tax. tribunal in many cases also allow exemption where there was no declaration even on consignment notes.

In gst 5% tax rate for gta not taking input tax credit on goods and services used in supplying the services. For other taking input tax credit gst date is 12% and in such case no rcm applicable.

[KASTURI SETHI]

Sh.Pawan Kumar Ji,

Thank you very much.

[Ganeshan Kalyani]

I fully agree with the views of the experts.

[Bhavika Chothani]

For first question, GTA is required to mention this on the invoice that tax is applicable on RCM basis
For second question, if supplier has taken the credit then the recipient is not required to make any payments

[GAWESH NARULA]

Can you please share, where it has been written, in the beginning of the year GTA has to opt he wants to go for RCM or Forward charge.

[GAWESH NARULA]

Through this notificiation it not clear GTA has to opt one option, he wants to go for RCM Or FCM

[KASTURI SETHI]

See Notification No.20/17-CT(R) dated 22.8.17 Serial No.9.Item No.(iii) against which the following words are mentioned:-

"Provided 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.”;

Relevant extract of 20th GST Council Meeting held on 5.8.17 (Point No.8).

"Allowed option of 12% GST with full ITC under forward charge. 5% GST with no ITC will also continue. (However, the GTA has to give an option at the beginning of financial year).

Notification and Minutes of meeting both allow option of 12% GST with full ITC under FCM.

Otherwise also when there is option between the two, you are to choose between the two ; either this way or that way. No other way. No choice to adopt hybrid procedure.

Also note that hybrid procedure in GTA is practically harmful rather being useful.

[ABHISHEK Kumar]

Dear Sir,

We are paying @5% on RCM basis for GTA services. Can we avail ITC of 5% paid or we have to pay 18%/12% to avail itc.

[KASTURI SETHI]

ITC can be taken on 5% under RCM but after cash payment of tax.

[ABHISHEK Kumar]

Thanks for your prompt reply sir. Solved my query.

AI Summary

GTA tax option: choose forward charge with input tax credit or reverse charge without credit, affecting recipient liability. A goods transport agency must elect at the start of the financial year to either operate under forward charge with input tax credit or to supply without claiming input tax credit under the reverse charge mechanism; hybrid treatment is prohibited. If reverse charge applies, the recipient bears the tax liability and may claim input tax credit subject to cash payment and ordinary ITC conditions. No separate declaration by the GTA is required, though invoices commonly state that GST is payable under RCM.