RCM LIABILITY ON FREIGHT PAID FOR TRANSPORATION OF EXEMPTD GOODS

[Shailander Jain]

A wholesale traders is purchasing Coconut Dry (Exempted Goods) from Andhra Pradesh and paying freight to transporter for movement of Exempted Goods. He is showing the freight amount separately in Profit and Loss ac by name 'Freight On exempted Goods'.

My Query is :

whether he is liable for payment of RCM u/s 9(3) of CGST Act on freight payment for movement of Exempted Goods.

[Padmanathan KV]

Pls find the following exemption entry in Notification No 12/2017-CT(R) dated 28-06-2017:

21

Services provided by a goods transport agency, Heading 9965 or Heading 9967 Services provided by a goods transport agency, by way of transport in a goods carriage of - (a) agricultural produce; (d) milk, salt and food grain including flour, pulses and rice; (e) organic manure; (f) newspaper or magazines registered with the Registrar of Newspapers; (g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or (h) defence or military equipments. by way of transport in a goods carriage of - (a) agricultural produce; (d) milk, salt and food grain including flour, pulses and rice; (e) organic manure; (f) newspaper or magazines registered with the Registrar of Newspapers; (g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or (h) defence or military equipments.

Nil

Nil

(d)  “agricultural produce” means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market; 

The issue to be considered is whether coconut dry will fit in agricultural produce? For that the exact process undertaken for the said "coconut dry" needs to be understood to give a solid reply.

If the goods are agricultural produce, then the GTA service would be exempted.

[Sadanand Bulbule]

Dear Sir

In terms of Notification No.13/2017-Central Tax [Rate] dated 28/06/2017,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 paying tax under RCM. So the liability to pay tax under RCM is irrespective of whether the goods are taxable or exempted. It's just for the transportation of "goods".

However such RCM liability is subject to following rider, with effect from 18/07/2022:

Provided further that nothing contained in this entry shall apply where, -

i. the supplier has taken registration under the GST Act, 2017 and exercised the option to pay tax on the services of GTA in relation to transport of goods supplied by him under forward charge; and

ii. the supplier has issued a tax invoice to the recipient charging GST at the applicable rates and has made a declaration as prescribed in Annexure III on such invoice issued by him.

[Sadanand Bulbule]

Dear Sir

Further I  endorse the view of Sri. Padmanathan ji.

[Alkesh Jani]

Shri,

Whether the transporter is GTA, if yes the views expressed by our experts are to be accepted.

Thanks.

[Shailander Jain]

Dear Professional,

Thanks for your valuable views and guided me, 

[Ganeshan Kalyani]

Yes, the taxability of goods which is being carried in the different and the taxability of service, here, GTA is different. Both to be considered separately as suggested by experts. 

AI Summary

Trader Questions Reverse Charge Liability on Freight for Exempted Goods Under Section 9(3) of CGST Act A wholesale trader inquired about the liability for Reverse Charge Mechanism (RCM) under Section 9(3) of the CGST Act on freight paid for transporting exempted goods, specifically Coconut Dry. Respondents referenced Notification No. 12/2017-CT(R) and Notification No. 13/2017-Central Tax [Rate], indicating that RCM applies to transportation services regardless of the goods' tax status. However, exemptions exist if the supplier opts for forward charge and issues a GST invoice. The discussion emphasized determining if Coconut Dry qualifies as agricultural produce, which would exempt the service under GTA provisions.