RCM on GTA

[Murari Agrawal]

We are getting consignment thru Transporter against Consignment note - freight is paid by the Consignor. For lifting the material from Transporter godown, they are taking loading charges and issuing receipt as 'Labour'. Are we required to pay RCM on the same.

Another query, some Transporters are not uploading details on their GSTR-2B, while we are paying the RCM on freight paid to them. Can we claim RCM credit. Thanks

[GUNASEKARAN K]

1. No GST Payable under RCM for Loading Charges claimed in the name of "Labour Charges"

2. Your GTA has to record their outward supply with Tax Payable under RCM Flag as "Yes"

3. Yes, the ITC paid under RCM is eligible and you can take credit and utilize it.

[Amit Agrawal]

For first part of the query, one needs to determine if activity of lifting the material is part of 'composite supply' where transport services is principal supply. And if answer is yes, then value of services provided by GTA will also include said loading charges.

Moreover, you also said that material is lifted from "Transporter godown". If there is 'storage & warehousing services' is also involved by same transporter, then, entire factual matrix needs to be re-checked before answering first part of the query.

For second part of the query, you can take ITC against taxes paid under RCM (if otherwise eligible) and same cannot be denied merely because some Transporters are not uploading outward supply details in their Form GSTR-1.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Agree with the view given by Amitji that the aspect of composite supply needs to be analysed to ascertain the RCM liability. Much better chance of not paying GST if the labour charges are paid to a person other than the transporter.

For items not appearing in GSTR-2B where liability under RCM exists and credit is taken, credit should not be denied. If the department goes on to deny then the case can be won at the Tribunal level considering the jurisprudence/cases under the earlier laws.

[Himansu Sekhar]

Loading charges will be the part of GTA services. It is inseparable and integrals connected with the GTA service. RCM applicable even if the charges are mentioned separately as labour charges.

[KASTURI SETHI]

Sh.Murari Agrawal Ji,

Answer to query no.1 is l YES. Since loading charges are an integral part of GTA services, GST is payable under RCM. The word, 'Labour' mentioned on receipt will not allow 'any relaxation' from payment of GST.

Answer to query no.2 ITC is allowed.

[Padmanathan KV]

Agreed with views of Amit Ji. The factual matrix has to be examined in detail.

Also, section 15(2) provides that incidental charges for anything done by supplier before or at the time of supply shall be included in the value of supply.

Thus, Composite supply vis-a-vis valuation under section 15 has to be examined along with the factual matrix in my opinion.

Second part of the query, assuming the said transporters are registered, section 16(2)(aa) might have implication while taking ITC. It has to be litigated in higher forums in my opinion.

[Amit Agrawal]

Thanks @ Shri Padmanatham Ji for specifically pointing out Section 15(2)(c) where value of supply includes "incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services"

I agree that this Section 15 (2)(c) is also an important element to be considered while answering the query.

Querist has said that material is lifted from "Transporter godown". If there is 'storage & warehousing services' is also involved by same transporter, then, another dispute arise whether 'loading charges' will be part of of value of 'storage & warehousing services' OR 'GTA Services' u/s 15 (2) (c).

Besides, one also needs to decide whether & if 'loading charges' is part of composite supply of 'storage & warehousing services' OR 'GTA Services'.

Again, if 'loading charges' is part of composite supply where 'storage & warehousing services' is the principal supply by the same person (i.e. transporter), then, Section 15 (2) (c) will not apply while valuing 'GTA' services.

Summarising above, entire arrangement needs to be looked into holistically to determine type of supply, number of services provided by the transporter, value u/s 15 for each supply provided read with Section 8, forward charge / reverse charge etc. before one can answer the first part of the queries raised.

Having said all above, if you are eligible to avail ITC against taxes so paid under RCM & if the supplier is not charging any gst against loading charges, it is practically advisable to pay taxes under RCM on 'Transport & loading Charges' (i.e. both elements are treated as part of value of GTA services received) and to take ITC there-against.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Murari Agrawal]

While I thank all the experts for their opinions, I am unable to reach to any conclusion. Since some experts have required more inputs, I am giving the facts:

1) Freight is payable by the Consignor - on the receipt issued by the Transporter for Labour charge, against Freight it is mentioned "To be billed".

2) Transporter is not providing any "Storage and warehousing" services.

3) We engage local (non GTA) vehicle to collect the material from Transporter.

4) Loading charges paid to Transporter are billed by them as "Labour Charge"

5) The labour charges are paid to the Transporter and not to any other person.

In the backdrop of the facts stated above, I would request the experts to advise the course of action for a non-professional person like me.

As regards taking input credit, experts have opined that we may have to litigate till higher forums if the Transporter does not upload. Since the amount involved is only a few thousand, it may not be worth fighting it out.

I would solicit a practical advise. Thanks

[KASTURI SETHI]

Who pays (bears) the amount of freight will pay GST under RCM on GTA services. That person may be consignor or consignee .

Regarding loading charges, position has already been explained above.

AI Summary

Reverse Charge Mechanism Applies to Transporter 'Labour' Charges Under GST; Composite Supply Debate Affects Tax Liability A discussion on the applicability of Reverse Charge Mechanism (RCM) under the Goods and Services Tax (GST) for loading charges labeled as 'Labour' by transporters. The consensus is that these charges are integral to the Goods Transport Agency (GTA) services, thus subject to GST under RCM. There is debate on whether these charges are part of a composite supply, potentially affecting tax liability. Input Tax Credit (ITC) can be claimed for RCM-paid taxes, though issues arise if transporters do not upload details in GSTR-2B. The querist seeks practical advice due to the low amount involved.