Reverse Charge Mechanism on Freight

[Harsh]

Whether RCM on Freight Paid to Good Transport Agency Will be Applicable if Goods transported are Nil Rated/Exempt

[Ryan Vaz]

Yes, RCM on GTA freight is applicable even if the goods transported are nil-rated or exempt, unless the GTA service itself is specifically exempt under Notification 12/2017-CTR.

The taxability of GTA service is independent of the GST rate on goods. Exemption depends on who pays freight, value thresholds, and nature of GTA service, not on whether goods are taxable or exempt.

[KASTURI SETHI]

Extract of Boards Flyer No. 39 dated 1.1.18           

GTA services specifically exempt

In terms of Notification no. 12/2017-Central Tax (Rate), dated 28-6-2017 (sr. no. 21), the following services provided by a GTA (Heading 9965 or 9967) is exempt from payment of tax :

Services provided by a goods transport agency, by way of transport in a goods carriage of -

(a) agricultural produce;

(b) goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees;

(c) goods, where consideration charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred and fifty;

(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 manmade disasters, calamities, accidents or mishap; or

(h) defense or military equipments.

Similarly, the following services received by the GTA (Heading 9966 or 9973) is also exempt in terms of notification no. 12/2017-Central Tax (Rate), dated 28-6-2017 (sr. no. 22)

Services by way of giving on hire -

………………..

(b) to a goods transport agency, a means of transportation of goods.

Thus, if the GTA hires a means of transportation of goods, no GST is payable on such transactions.

[Shilpi Jain]

There is not a blanket answer for this. Depending on the goods transported the exemption will have to be examined. There could also be cases where transportation charges of taxable goods are exempt. Specific goods if known, one can answer or one can directly check the exemption notification to identify. 

AI Summary

Freight RCM on GTA services applies even when goods are nil-rated or exempt, unless the GTA service itself is exempt. Reverse charge on freight to a goods transport agency applies irrespective of whether transported goods are nil-rated or exempt; the controlling test is whether the GTA service itself is exempt under the relevant notification. Exemption depends on payer, value thresholds, and the nature of the GTA service, with specific exempt categories (agricultural produce, low-value consignments, certain food items, organic manure, registered publications, relief materials, defense equipment) and an exemption for hire of means of transport to a GTA.