GST on GTA

[Ayub Mohammad]

A (Registered Taxpayer) entrusted B (GTA) to transport its goods by road from one place to other. B not having enough means of transport entrusted C (GTA) for transport of a part of total goods. C also used the trucks of truck owners who are not GTAs. Now B will raise an invoice on A with RCM.

1. If C will raise invoice on B with RCM?

2. If answer is Yes, GSTR 2A of B will be flooded with entries of C for tax to be paid on RCM. If B is liable to pay GST on RCM for using trucks from C

3. If C shall pay GST (RCM) for using truck owners (unregistered) for transportation?

[Shilpi Jain]

For any goods transportation services only one consignment note will be issued. The person issuing such note would be a gta and liable to gst either under FCM or RCM

[Shilpi Jain]

All other persons transporting goods without issue of invoice, should be exempt. Though the department sure does have another view....

[KASTURI SETHI]

Sh.Ayub Mohammad Ji,

My views are as under:-

As per Notification No.13/17-CT(Rate) and Notification no.10/17-CT(R) both dated 28.6.17 as amended.

Explanation : " (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." Provided he is covered under the specified categories mentioned in the Notification itself (serial no.1).

As per above, preference-wise liability is cast upon as under:-

1.Consignor (under RCM) 'A'

2.Consignee (under RCM) --(Agreement is between A and B).

3. GTA (FCM) 'B'

Supposing A will pay or is liable to pay freight, so the whole responsibility for payment of GST on the amount of freight is cast upon A under RCM. A has nothing to do with 'C'. B will pay GST on the amount of freight only if Consignor and consignee are not in the specified categories and B opts for FCM.

As per Notification No.12/17-CT(R) dated 28.6.17, (serial no.22), Vehicle given on hiring to GTA for transportation of goods by road attracts NIL rate of tax. Hence the activity of C giving vehicle on hire to GTA for transportation of goods is exempt from payment of tax.Therefore, hiring by C to B and by unregistered transporters to C is exempt from GST by virtue of serial no. 22 of Notification No.12/17-CT(R) dated 28.6.17.

Now in the light of above query-wise reply is as under:-

1. NO.

2. Not Applicable. Answer to query no.1 is NO.

3. No.

[Ayub Mohammad]

Thank you sir, for you detail reply. However, C in this case is not the owner of trucks. It uses the service of truck owners for transportation. In such case, if C shall raise invoice on B on FCM/RCM/Exempted basis.

[KASTURI SETHI]

O.K. C is not owner of trucks but C is GTA Truck owners (unregistered) give trucks on hire basis to C for transportation of goods.

C will raise invoice on B indicating nil rate of tax as already explained above. Ultimately A will pay GST on the whole amount of freight paid to B. Govt. will not suffer loss of revenue. What I observe reason behind NIL rate on giving trucks on hire basis to GTA is that Govt. will get GST on freight via GTA and thus such exemption will also avoid double taxation.

These are my views. To be doubly sure and safe you may seek advice from other experts.

[Shilpi Jain]

Yes. Looks like this sector has some complications and the GTA service has been prone to litigation even in the erstwhile laws.

Also, this is one of the favourite RCMs which the department sees in any of its audit.

AI Summary

Reverse charge mechanism places GST responsibility on the consignor for road freight; vehicle hiring to GTAs attracts nil rate.
Primary GST liability for road freight rests with the person liable to pay freight under the notification, typically the consignor under the reverse charge mechanism; the contracting GTA bears forward-charge liability only if consignor/consignee are not covered and the GTA elects forward charging. Hiring of vehicles to a GTA for transport is nil-rated, so vehicle owners (including unregistered owners hired by a subcontracting GTA) need not charge GST on such hiring.