Clarification on Tax Liability under RCM in case of Services Provided by One Registered GTA to Another Registered GTA

[DIVYESH GANDHI]

We seek your clarification on the applicability of GST under the Reverse Charge Mechanism (RCM) in the following scenario:

1. GTA-1 is a GST-registered Goods Transport Agency (GTA) that has opted to pay GST under RCM, and issues a consignment note.

2. GTA-2 is also a GST-registered GTA, which has likewise opted to discharge GST under RCM, and also issues a consignment note to the end customer.

3. GTA-1 provides goods transportation service to GTA-2, and thereafter GTA-2 supplies the same transportation service to the end customer (e.g., manufacturer, body corporate, etc.), who falls under the specified category liable under RCM.

[Shilpi Jain]

Generally there can be only one consignment note issued for one transaction. See whether the arrangement between GTA-1 and GTA 2 can be that of leasing / renting of vehicle?

[KASTURI SETHI]

Is GTA-2  not playing the role of intermediary service ?  Any agreement between both GTAs ?

[YAGAY andSUN]

When one registered Goods Transport Agency (GTA-1) provides transportation services to another registered GTA (GTA-2), and both have opted to discharge GST under the Reverse Charge Mechanism (RCM), it is important to note that the RCM provisions under Notification No. 13/2017-Central Tax (Rate) are applicable only when services are provided by a GTA to specified categories of recipients such as factories, body corporates, partnership firms, etc. Another GTA is not included in this list of notified recipients. Therefore, when GTA-1 renders services to GTA-2, this transaction does not fall under RCM. Instead, GTA-1 is required to discharge GST under the forward charge mechanism, and must issue a tax invoice charging applicable GST.

GTA-2, in this setup, is not acting as an intermediary as defined under GST. An intermediary typically arranges or facilitates the supply of services between two parties without providing the service on their own account. However, in this case, GTA-2 receives the transportation service from GTA-1 and independently supplies the same service to the end customer by issuing its own consignment note. This indicates that GTA-2 is not arranging services but is instead providing the service as a principal in its own right. Therefore, the subsequent supply from GTA-2 to the end customer, if made to a notified recipient under RCM, will attract GST under RCM and the end customer will be liable to pay the tax.

The existence of a formal agreement between GTA-1 and GTA-2 may clarify commercial terms, but the tax treatment depends primarily on the nature of the supply and the status of the recipient under the GST framework. In summary, GTA-1 must charge GST under forward charge to GTA-2, and GTA-2’s onward supply to the end customer will be liable under RCM if the customer falls within the notified category.

[KASTURI SETHI]

Three persons (GTA-1, GTA-2 and Consumer) are involved in this scenario. They must have executed an agreement among themselves. So here an agreement, if enforceable by law, is a determinant factor to ascertain whether intermediary service is present or not.