Easy Guide to GTA (Goods Transport Agency) Under GST Act

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Easy Guide to GTA (Goods Transport Agency) Under GST Act

The transportation and logistics industry is the backbone of all other industries and businesses. Agencies undertaking transportation of goods by road under GST from one person to another are regarded as Goods Transport Agency (GTA). What’s peculiar about GTAs is that they are provided exemption from registration and paying tax under the GST law. Persons who transport their goods through GTAs are required to pay GST on Reverse Charge Mechanism (RCM) basis.

Wait, but what is RCM? And am I liable to pay tax for availing transportation services from GTA? To answer all these questions, here’s an easy guide to GTA under the GST act.

What is a Reverse Charge Mechanism (RCM)?

Normally, under GST, the supplier is responsible to collect GST from the customers and pay it to the government. However, in certain peculiar cases, the responsibility of paying tax is on the recipient who is availing of goods and services. This is known as the reverse charge mechanism or RCM.
The payment of tax under RCM shall be done in cash but the recipient can avail of the ITC for the same. The recipient shall generate a self-invoice for services availed on an RCM basis and pay tax on the same to the government.

What is GTA as per GST Law?

The definition of Goods Transport Agency is covered under clause (ze) of Notification No. 12/2017 – Central Tax (Rate) as follows:

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;

Therefore, in the case of services provided by a GTA, the issue of a consignment note is mandatory otherwise the services will not fall under the ambit of GTA services. However, the consignment note has not been defined anywhere in GST. Therefore, inference can be drawn from the erstwhile service tax rules.

As per Rule 4B of the Service Tax Rules 1994, a consignment note means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, the person liable for paying service tax whether consignor, consignee or the goods transport agency. 

GST Implications on GTA Services

As we discussed earlier, the services availed of from GTA are liable to GST under reverse charge basis. However, it is not the case always. Only for the GTA services provided to certain registered persons does RCM becomes applicable. In all other cases, GTA shall be liable to discharge its tax liability as per Forward Charge Mechanism (FCM) i.e., in the normal way. Let’s discuss both FCM and RCM on GTA under GST in detail.

GTA Services – Whether FCM or RCM?

GTA services are liable to tax on both RCM and FCM basis. However, it is important to know when to apply RCM or FCM. It primarily depends upon the recipient of the supply. The person who pays or is liable to pay the freight for transportation of goods in a goods carriage and is located in a taxable territory is known as the recipient of GTA services. The following recipients are known as specified recipients for the purpose of transportation of goods by road under GST:

  • A factory registered under the Factories Act, 1948
  • A society registered under the Societies Registration Act, 1860 or any other law for the time being in force
  • Any co-operative society established by or under any law for the time being in force
  • Any person registered under the CGST act, IGST act, SGST act or UTGST act
  • Any body corporate established by or under any law for the time being in force
  • Any partnership firm whether registered under any law or not including the association of persons
  • Any casual taxable person

Now following shall be the GST implications for GTA services:

  • GST shall be paid at 5% (i.e., 2.5% CGST + 2.5% SGST/UTGST or 5% IGST) where the GTA has not availed of ITC on the goods and services that are used to provide the services of transportation of goods by road under GST. Now in such case, the specified recipients shall be liable to pay GST on RCM basis. For recipients other than specified recipients (for instance, unregistered individual end consumers), the GTA services shall be exempt from GST.
  • GST shall be paid at 12% (i.e., 6% CGST + 6% SGST/UTGST or 12% IGST) where the GTA opts to pay the GST on the said rate. In this case, the GTA shall be allowed to avail of the ITC on goods and services used to provide such transportation services. Now in such case, where the recipients are specified recipients, the GST shall be paid on FCM basis by the GTA itself. Again, for recipients other than specified recipients, the services shall be exempt from GST.

Where the tax is paid on RCM basis, the GTA service provider cannot charge GST from the recipient. Further, RCM shall be applicable only in the case where the supplier does not issue an invoice charging GST @ 12%.

However, in the following cases, the RCM shall not be applicable to the services in relation to the transport of goods in a goods carriage provided by GTA to the following:

  • An establishment or department of the Central Government, State Government or Union Territory
  • Local authority
  • Governmental agencies

that have taken registrations under the CGST act for the sole purpose of deducting TDS under Section 51 and are not making a taxable supply of goods or services.

In a Nutshell

Goods Transport Agency (GTA) services are one of the most used input services by businesses. Therefore, it is important to understand the GST implications of these services in order to avoid inaccuracies and wrongful treatment. If you are availing of GTA services or are a GTA service provider, then contact your eAuditors now to understand the GST implications. 

Author : Dipen

Date     : 30-Aug-2022