GST on Goods Transport Agency (GTA) Vs Goods Transport Operator (GTO)
There is an ongoing confusion amongst the business organizations and finance professional with respect to the applicability, taxability and exemption in GTA and GTO services under GST Law. Here we would like to highlight key impacts, definition, taxability and exemption to GTA and GTO services.
Definition of GTA & GTO
Goods Transport Agency (GTA) is not defined under the CGST Act,2017 but the same is defined in exemption Notification No. 12/2017 – CGST (Rate) dated 28th June, 2017 and Notification No. 9/2017- IGST (Rate) dated 28th June, 2017 and according to which “GTA means any person who provides services in relation to transportation of goods by road and issue consignment note (builty)”.
On the other hand GTO means any person who is engaged in transportation of goods and may or may not include GTA.
Main difference between GTA and GTO is issue of consignment note (builty). A GTA may or may not own any transportation vehicle but a GTO owns a transportation vehicle.
The above diagram shows the flow of services which can either directly by GTO to customer or by GTO to GTA and then to ultimate customer. Let’s now understand the taxability, exemption and RCM applicability in above transactions.
Exemption to GTO and GTA services
1. Entry no. 18 in exemption Notification No 12/2017-CGST (Rate)
Services by way of transportation of Goods (GTO):-
(a) By road except the services of –
i. a Goods transport Agency (GTA)
ii. a Courier Agency;
(b) by Inland waterways
2. Entry no. 22 in exemption Notification No 12/2017-CGST (Rate)
Services by way of Giving on Hire:-
(a) To a state transport undertaking a motor vehicle meant to carry more than twelve passengers; or
(b) to a Goods Transport Agency (GTA) a means of transportation of goods.
3. Entry no. 21 in exemption Notification No 12/2017-CGST (Rate)
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
4. Entry no. 21A in exemption Notification No 32/2017-CGST (Rate)
Services provided by a goods transport agency to an unregistered person, including an unregistered casual taxable person.
5. Entry no. 21B in exemption Notification No 28/2018-CGST (Rate)
Services provided by a goods transport agency, by way of transport of goods in a goods carriage, to, –
(a) a Department or Establishment of the Central Government or State Government or Union territory; or
(b) local authority; or
(c) Governmental agencies, which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under Section 51 and not for making a taxable supply of goods or services.
From the above-mentioned exemptions, it is clear that services of Transportation of Goods are exempt services provided the GTO is not registered as GTA service provider. Further to this certain exemptions are provided to GTA service providers specifically when services are provided to unregistered individuals or HUF, or transportation of specific goods, or services provided to a government organization.
What is Taxable
After considering the above said exemptions the below mentioned services by GTA will be taxable if provided to below mentioned persons:
(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 for the time being in force; or
(d) any body corporate established, by or under any law for the time being in force; or
(e) any partnership firm whether registered or not under any law including association of persons;
(f) any casual taxable 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
(g) any registered person under GST
RCM or Forward Charge
Prior to the notification 20/2017- CGST (Rate) the GTA services were covered under rate of 5% with no ITC but businesses were facing issues since they were paying heavy input Tax on their purchase of vehicles and was becoming part of their cost thereby making their services expensive. After request from the business fraternities and writs filed with high court the government made the amendment vide N/N 20/2017 giving option to GTA service providers to pay tax under forward charge @ 12% and avail input tax credits.
Now the GTA has the option to pay tax under Forward charge @12% or under RCM @5%.
If a GTA opt for forward charge then it is eligible to avail GST input credit and on the other hand if it opts to pay tax under RCM @5% then input tax credit will not be available. However the service recipient paying GST under RCM @5% will be able to take ITC after payment of tax under RCM.
The option to pay tax either under Forward charge or RCM has to be exercised at the beginning of the Financial Year and once option is exercised than it will remain applicable for whole year.
Author
CA Sumit Bamba
