Every mode of transport, whether via road, rail, water, or air, all fulfil crucial roles in the economy. While freight transportation is driven by the demands generated by the manufacturing industries and consumption. It also creates demand for commercial vehicles, cargo airplanes, freight trains etc. With one of the largest GDPs in the world, India has a substantial logistics sector, which employs millions of people. Furthermore, the vast infrastructure network of roads, ports, railways, and airports also stimulates the construction industry of the country. This article covers GST on Goods Transportation Business via roads; as around 2.9 trillion metric tons per kilometre of freight was moved via road transport across India in fiscal year 2020. Road transportation is the dominant method of freight logistic in India.

Service of transportation of goods is exempt under GST?

Vide Entry No. 18, Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017, Following services are exempt:
Services by way of transportation of Goods-
a) By road except the services of-
1. a goods transportation agency;
2. a courier agency;
b) By inland waterways.
Therefore, the service of transportation of goods by road continues to be exempt even under GST Regime. GST is applicable only on Goods Transportation Agency (GTA).

What is GTA?

As per clause (ze) of Notification no. 1136 F.T. (12/2017-Central Tax (Rate) dated 28.06.2017- “Goods transport Agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.”
Thus, issuance of a consignment note is must for a supplier of service to be considered as a Goods Transport Agency. If a consignment note is not issued by the transporter, the service provider will not come within ambit of goods transport agency. If a consignment note is issued, it indicates that the lien on the goods has been transferred and the transporter becomes responsible for the goods tills its safe delivery to the consignee.

What is consignment note?

Consignment note means a document, issued by a GTA against the receipt of Goods for the purpose of transport of goods by road in a goods carriage.

GTA services specifically exempt

In terms of notification no. 1136 F.T. (12/2017-Central Tax (Rate)) dated 28.06.2017 (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 man-made disasters, calamities, accidents or mishap; or
(h) defence or military equipments
Similarly, the following services received by the GTA (Heading 9966 or 9973) is also exempt in terms of notification no. 1136 F.T. (12/2017- Central Tax (Rate)) dated 28.06.2017 (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.

What is GST rate on GTA?

Other than transportation of above goods, GTA have two option to pay GST on their services:
1. 5% no ITC
Or
2. 12% with ITC

Person Liable to Pay GST on GTA services

The liability to pay GST devolves on the recipients for supply of services by a goods transport agency (GTA),who has not paid central tax at the rate of 6%, in respect of transportation of goods by road (in terms of notification no. 1137 F.T. (13/2017-Central Tax (Rate)) dated 28.06.2017 (sr.no.1) as amended by notification no. 1499 F.T. (22/2017-Central Tax (Rate)) dated 22.08.2017, if the recipients (located in the taxable territory) belong to the following category:
(a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or
(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or
(c) any co-operative society established by or under any law; or
(d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or
(e) any body corporate established, by or under any law; or
(f) any partnership firm whether registered or not under any law including association of persons; or
(g) any casual taxable person.
Thus, in cases where services of GTA are availed by the above categories of persons in the taxable territory the GTA supplier has the option to pay tax (and avail ITC) @12% (6% CGST + 6% SGST); and if the GTA does not avail this option, the liability to pay GST will fall on the recipients. In all other cases where the recipients do not fall in the categories mentioned above, the liability will be on the supplier of GTA services.

Latest Updates

50th GST Council meeting
In the 50th GST Council meeting held on 11th July 2023, the Council provided a relaxation for Goods Transport Agencies (GTAs) wishing to pay GST on a forward charge basis. GTAs will not be required to file a declaration for paying GST under forward charge every year. The option, once exercised for a particular financial year, will be deemed to have been exercised for future financial years unless a declaration is filed to revert that decision.
Further, the deadline to exercise this option will now be 31st March of the preceding financial year instead of 15th March.

**Irrespective of GTA choosing 12% (with ITC) and 5% (without ITC), if the GTA opts for paying tax on forward charge by giving a declaration, then it appears in the tax invoice. If that declaration is not given, then GTA has chosen for the reverse charge where the recipient must deposit tax and ITC cannot be availed by the GTA.

Is a GTA liable to register?

There was a lot of confusion about whether a GTA has to register under GST. As per Notification No. 5/2017- Central Tax dated 19/06/2017, a person who is engaged in making only supplies of taxable goods/services on which Reverse Charge Mechanism (RCM) applies is exempted from obtaining registration under GST.
Thus, a GTA does not have to register under GST if he is exclusively transporting goods where the total tax is required to be paid by the recipient under reverse charge basis (even if the turnover exceeds the threshold limit).

Who will pay under Reverse Charge?

As per Notification No. 13/2017- Central Tax 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 receiver of service.

How to determine Place of Supply for a GTA

The place of supply of services by way of transportation of goods, including by mail or courier to––
(a) a registered person, shall be the location of such person
(b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation.

Author

CA. Rishabh Jain
Chartered Accountant
E-mail: carishabh28@gmail.com; spmrindia@gmail.com