GST on Transportation charges

[KUMAR Narasimhan]

Dear Sir / Madam

1) RCM to be paid by a registered person if GTA provide service to him

2) RCM to be paid by a registered person if URD GTA provide service more than ₹ 1500 to him.

3) If a registered person receives services from a local transporter who does not provide consignment note, is it subject to RCM? Freight cost is ₹ 55000/-

Please clarify

[KASTURI SETHI]

Issuance of consignment note is mandatory for GTA. If consignment note is not issued, that transporter does not qualify as GTA. At the same time, non-issuance of consignment note cannot be adopted as modus operandi to evade tax.

Go through relevant extract of C.B.E. & C. Flyer No. 39, dated 1-1-2018 which is as under :-

Who is a GTA - Goods Transport Agency ?

As per Section 65B(26) of the Finance Act, 1994; “Goods Transport Agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called”. Therefore, in the Service Tax regime, issuance of Consignment Note (C/N) was integral and mandatory requirement before any road transporter could be brought within the ambit of GTA.

Position under GST

Under GST laws, the definition of Goods Transport Agency is provided in clause (ze) of notification no. 12/2017-Central Tax (Rate), dated 28-6-2017.

(ze) “goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called;

Thus, it can be seen that issuance of a consignment note is the sine-qua-non for a supplier of service to be considered as a Goods Transport Agency. If such a consignment note is not issued by the transporter, the service provider will not come within the ambit of goods transport agency. 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.

What is a consignment note?

Consignment Note is neither defined in the Act nor in the notification no. 12/2017-Central Tax (Rate). Guidance can be taken from the meaning ascribed to the term under the Explanation to Rule 4B of Service Tax Rules, 1994. In terms of the said rule, consignment note means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the goods transport agency.

[Alkesh Jani]

Shri Kasturiji Sir and all Experts,

In agreement to the reply given by Shri Kasturiji Sir, allow me to raise one query, regarding place of supply of service for transportation of goods.

In terms of Section 12(8) of IGST Act, 2017, which is reproduced below:-

“(8) The place of supply of services by way of transportation of goods, including by mail or courier to,––

(a) a registered person, shall be the location of such person;

(b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation.”

Your insight in respect of 12(8)(a) of the above provision.

If the person is registered in the state of Gujarat avails the service of GTA of Delhi for transportation of goods, what will be the place of supply? CGST + SGST or IGST?

Thanks in Advance

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

In my view, in such scenario, CGST/SGST is always applicable as recipient of GTA service will pay GST under RCM and under RCM recipient is deemed service provider. Recipient being service provider (deemed), the place of supply will be same State where recipient is located. Supplier (being deemed ) of service and recipient of service are same person for the purpose of discharging GST liability. Here the word, 'deemed' cannot disturb the determination of place of supply in the same State i.e. intra State and not inter-State.

[KUMAR Narasimhan]

Dear Sir,

Thank you for the clarification.

Please clarify me the below sir.

If Mr XUV registered person receive a service from local transporter through out the year value approx ₹ 500000/- who is not registered, will that be subject to RCM to Mr XUV

[Alkesh Jani]

Shri Kasturiji Sir,

Thanks for the views, your views have helped me to attain finality of my thought process on the issue.

Thanks and with due regards

[Alkesh Jani]

Shri

On going through Sl.No. 18 of Notification No.12/2017-CT (Rate), the service by way of transportation of goods by road, is subject to Nil rate of tax without any conditions.

If the transportation of goods by road is provided by GTA (who issues consignment note) RCM will be applicable as per Notification No. 13/2017-CT (Rate), issued under Section 9(3) of CGST Act.

In view of above, for Point No.3), GST rate is Nil. Further, it is very clear that transporter are not liable to pay GST nor registration is required for them, Only GTA is under the ambit of GST and forward charge or Reverse charge, as the case may be, is applicable.

[KASTURI SETHI]

Q. If Mr XUV registered person receive a service from local transporter through out the year value approx ₹ 500000/- who is not registered, will that be subject to RCM to Mr XUV.

Ans. If registered person receives only vehicle for transportation of goods by road from unregistered person, then unregistered person is GTO and not GTA. That GTO is exempt from GST and hence registered person XUV is not required to pay GST under RCM. In this scenario, consignment note is not in picture as GTO does not issue consignment note.

Second scenario

If GTA is unregistered or does not charge GST in his invoice to the registered person, the recipient is liable to pay GST @ 5%. In other words, the person who pays or is liable to pay freight for the transportation of goods by road, will pay GST on the amount of freight paid under RCM.

[KUMAR Narasimhan]

Dear Sir,

Thank you so much for the clarification sir.

[CA Hemanth Kumar]

Dear Sir,

Agreed with the views of KASTURI SETHI Sir and with due respect my view of POS question will be different

GTA Supplier is in Delhi and Recipient is in Gujarat. In this scenario, in my view the location of supplier will be GTA only and PoS will be Gujarat, IGST needs to be paid for the said transaction.

Reasons for the above view

Reason 1. If we see section 9(3) it deems recipient as the person only to pay tax and it does not treats him as a supplier of service. Thereby we cannot treat the recipient as a supplier of service.

(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

If we see section 9(5) it deems the e-com operators as the supplier of services. Thereby there is a difference between 9(3) and 9(5). Only in senarious covered under 9(5), e-com will be deemed as a supplier of service.

(5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:

Reason 2. In case if the GTA person in Delhi issues an invoice, he will mention the PoS as Gujarat and charge IGST @ 5%. The same will be disclosed by GTA in their GSTR-1 which inturn reflects in recipients GSTR-2B and GSTR-3B as IGST liability and not as CGST and SGST.

Correct me if im wrong .

Regards

CA Hemanth Kumar

AI Summary

Goods Transport Agency status determines reverse charge liability and whether recipient must discharge GST or service is exempt. Issuance of a consignment note is the defining requirement for classification as a Goods Transport Agency; transporters who do not issue consignment notes are treated as goods transport operators and their services are exempt from GST. If a supplier qualifies as a GTA but is unregistered or does not charge GST, the registered recipient is liable under the reverse charge mechanism to pay GST on freight and account for compliance. Parties differ on whether RCM treatment alters place-of-supply determination, affecting whether intra-state or inter-state tax heads apply.