The activity of hiring out trucks for the transportation of goods can qualify as an exempt supply under GST, but only under specific conditions. Below is a legal analysis covering the reasons for exemption, applicable notifications, conditions, and required documentation.
🔹 Why is it Exempted?
The hiring of trucks for the transport of goods is considered exempt from GST only when it falls under the service category of "transportation of goods by road by a goods transport agency (GTA), excluding courier and express cargo services", or when the service provider is not acting as a GTA, but merely renting out the vehicle without any control over the transportation.
🔹 Applicable Notification
The exemption is provided under:
Exemption Entry:
Services by way of giving on hire to a goods transport agency, a means of transportation of goods.
This means that if the registered person hires out trucks to a GTA, that hiring service itself is exempt from GST.
Additionally, Entry 22 of the same notification also provides exemption for:
Services by way of transportation of goods by road (except the services of a goods transport agency and courier agency).
So, if the person is not acting as a GTA (i.e., does not issue a consignment note), and merely provides the truck to others for their own use, he is not considered a GTA, and the activity may fall under exempt services.
🔹 Conditions for Exemption
- No Consignment Note Issued:
If the truck owner does not issue a consignment note, he is not a GTA as per GST law, and his activity does not attract GST.
- Not Providing Transport as a GTA:
If the truck is merely being rented out without any liability for the goods or transport logistics, then it is a mere hiring service and can fall under the exemption.
- Hiring Given to a GTA (not end user):
If the hiring is to a GTA (who in turn transports goods), the hiring charges are exempt under Entry 22(b) of Notification 12/2017.
🔹 Documents to Be Maintained
To establish that the activity qualifies as exempted supply, the following documents should be maintained by the taxpayer:
- Rental/Hire Agreement or Contract:
Clearly stating the terms, duration, and nature of hiring – particularly that the truck is hired without driver/logistics service, i.e., not a transport service.
- Invoices or Receipts for Hire Charges:
Clearly mentioning that the transaction is for "hiring of goods vehicle", not for transport service.
- Declaration of No Consignment Note:
Maintain a self-declaration or system-generated statement showing that no consignment note was issued in any transaction.
- Ledger/Accounting Records:
Books of accounts must clearly show hire income separately under exempted income heads.
- GST Returns (GSTR-1 and GSTR-9):
Exempted supplies must be properly reported in Table 8 of GSTR-1 and relevant sections of GSTR-9.
🔹 Important Note on GTA Definition
As per Notification No. 11/2017-Central Tax (Rate), a GTA is defined as:
“Any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.”
So, issuance of a consignment note is the key test to determine whether a person is a GTA. If no consignment note is issued, the person is not a GTA, and his activity could fall under exempted services.
✅ Conclusion
The activity of hiring out trucks is exempted from GST under Notification No. 12/2017-Central Tax (Rate), Entry 22, subject to the condition that:
- The person does not issue a consignment note (i.e., is not a GTA), or
- The trucks are hired to a GTA for transport use.
Maintaining proper documentation and evidence is critical to substantiate the exemption during audit or scrutiny.
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