Transportation Contract with person registered under GST but not GTA

[GIRISH PANJWANI]

My Query is as under

1. ABC PVT LTD is sender of goods (Pune based), he sell goods in whole Maharashtra and Goa

2. Company enters contract with the registers person for shipping of Goods to different locations, This person is Not GST, he provides service of transportation of Goods from ABC PVT LTD premise to the place of transporter.

3. Company pays contractor full transportation charges including Charges charged by GTA

4. GTA issue Lorry Receipt in name of ABC PVT LTD as consignor and Customer as Consignee but goods are handed to contractor and contractor has given the goods to GTA

Question

1. What should be constrains of E way bill

2. What will be status or say service provided by the contractor and Rate of GST?

3. Payment paid to Contractor will be allowable and credit of ITC will be allowable

[Shilpi Jain]

. What should be constrains of E way bill

Query not clear

2. What will be status or say service provided by the contractor and Rate of GST?

You could look at getting into a pure agent arrangement with the contractor so the company pays tax on transportation at 5% if rcm is applicable else 12%. The charges to contractor will be liable at 18%.

If this is not possible the department would contend that the service is liable at 18: as transport facilitation.

The above also depends on the way t1he contract is worded with the contractor.

3. Payment paid to Contractor will be allowable and credit of ITC will be allowable

Yes if it is in relation to taxable supply.

[ABHISHEK TRIPATHI]

Dear Girish Panjwani Ji,

Kindly clarify:

The role and responsibility of the contractor. Is he a transport company making sure that your goods reach to another transporter? Or the contractor is acting as an agent? Whether his responsibility is to make sure that the goods are reaching the end consumers? Little advice: In such a situation, draft contract which defines the roles and responsibility of the contractor like an agent, and the works should be of an agent.

Hope the distance between your business premise and transporter is less than 50 Kms. In such a situation no need for E-way Bill. If it's more than 50 Kms, then yes, the contractor has to carry the e-way bill.

Who pays the GTA Charges? You need to tell us about the contract between you and the customers. The one who pays the GTA charges is service recipient. You need to tell, whether the GTA (transporter) is discharging forward charge, In simple terms, whether they are issuing an invoice charging you GST? Any unregistered transporter from whom the services are taken?

[GIRISH PANJWANI]

Thank you @ Shilpi Jain for reply

Thank You @ ABHISHEK TRIPATHI reply

For Shilpi jain

1. How e-way bill be generated and parties to be shown in eway bill

2. If pure agent agrement is entered then Contractor commission will be disclosed the parties so this is not an option for us.

For ABHISHEK TRIPATHI

1. The role and responsibility of the contractor is to pick the good from ABC LTD chose the transporter for destination and delivery the goods to transporter and charge the transport charges from ABC LTD, once contractor gives lorry receipt to the ABC LTD his job is done, now the transporter and ABC LTD will look after if any thing happen or take place till delivery to end customer

2. Disctance between Contractor ABC LTD and transporter is less than 50 KMs

[Shilpi Jain]

This is a tricky situation prevailing in the industry. In case the customer is eligible for credit, chrage 18% since you are not issuing consignment note and are not assuming responsibility or liability for the transportation.

[GIRISH PANJWANI]

If contractor pays 18% and issue the bill, Who will pay the RCM on transportation. If contractor then, Will he be eligible for taking the credit of same?.

[ABHISHEK TRIPATHI]

Dear Girish Ji,

The contractor is not issuing consignment note and the lien on the goods has not been transferred to the contractor. Hence, contractor may be anything other than GTA.

As the contractor is not doing the actual transportation, he may fall under 996793 – Other goods transport services n.e.c. And for GST the same will fall under Sl No. 11(ii) of the Notification 11/2017-CT (Rate), “(ii) Supporting services in transport other than (i) above”.

Who will be liable to pay GST under RCM for GTA Services?

See, this might be contentious. In my view, as per the explanation of NN 13/2017-CT(Rate), it has two conditions to decide - (i) The person who pays or (ii) The person who is liable to pay. So, even the person who is liable to pay may be called as ‘recipient’. In your case, the company is liable to pay and hence they are the recipient for discharging GST under RCM. The relevant extract of the explanation hereinbelow:

(a)The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of this notification

Your query: -

For the sake of arguing you may call the contractor as the recipient for discharging GST under RCM. Because the contractor is paying the freight [‘The person who pays’]. As the recipient definition is extremely narrow under the notification. In such a business model, the contractor will pay 5% RCM, then raise an invoice and charge 18%. ITC is available subject to Chapter V.

2nd Model – The company pays 5% under RCM and the contractor raises GST invoice for his services under 996793 and charge 18%. In addition to the GST invoice, the contractor may raise commercial invoice [contractor service and freight charges].

AI Summary

Recipient liability for GST on road freight depends on who is liable to pay, affecting reverse charge and ITC entitlement.
Whether GST and e-way bill obligations arise when a contractor collects goods and hands them to a transporter depends on the contractor's contractual role, the nature of the service, and who is liable to pay freight. If the contractor is a facilitator and not a GTA, its facilitation charges may attract the higher rate for supporting transport services; a pure agent structure can alter characterisation but requires clear contract language. Reverse charge liability for road freight follows the person who pays or is liable to pay the freight, affecting which party must discharge tax and who can claim input tax credit.