GST on GTA Services

Service of transportation of goods

Service classification heading for Goods Transport Services 9965 The groups in this heading are Land transport services of goods (99651), water transport services of goods (99652) and Air and space transport services of goods (99653) Heading for Rental services of transport vehicles with or without operators 9966

Heading for support service is Supporting services in transport is 9967 Groups in this heading are Cargo handling services (99671) storage and warehousing services (99672), Supporting services for railway transport (99673) Supporting services for road transport (99674). Supporting services for water transport (99675) Supporting services for air or space transport (99676) and Other supporting transport services (99679)

Multimodal transportation of goods within India

In case of multimodal transportation of goods, tax rate is IGST 12% for (CGST 6% plus SGST/UTGST 6%) Input Tax Credit is available Notification No. 11/2017-CT (Rate) and No. 8/2017 IT (Rate) both dated 28/6/2017 as inserted w.e.f 27-7-2018

This concessional rate applies only for multimodal transport within India Explanation 2 to item (v) Sr No. 9 inserted wef 1-1-2019 during 27-7-2018 to 1-1-2019, the concessional rate was applicable to service of multimodal transport even when destination was out of India. [Other argument is that since it is only an explanation, it is applicable with retrospective effect)

Meaning of Multimodal Transportation is carriage of goods by at least two different modes of transport from the place of acceptance of goods to the place of delivery of goods by a multimodal transporter.

Mode of Transport means carriage of goods by road, air, rail, inland waterways or sea.

Multimodal transporter Multimodal transporter” means a person who,
(A) enters into a contract under which he undertakes to perform multimodal transportation against freight; and
(B) acts as principal, and not as an agent either of the consignor, or consignee or of the carrier participating in the multimodal transportation and who responsibility for the performance of the said contract.

Transportation of goods other than multimodal transportation or other than by road, air or water

In case of transportation of goods other than multimodal transportation or other than by road air or water, the tax rate is IGST 18% (or CGST 9% plus SGST UTGST Input Tax Credit is available Notification No. (Rate) and No. 9/2011 (Rate) both dated 28-6-2017 as inserted w.e.f 27-7-2018 discussed below. The tax rates for transportation of goods by air, water and road are discussed below.

GST on Goods Transport by Road

Classification heading for land transport services of goods by road is 9965 Services by way of transportation of goods by road except the services of (i) a good transportation agency (ii) a courier agency are exempt from GST Notification Ne 12/2017 CT (Rate) and No. 9/2017-IT (Rate) both dated 28-6-2017, effective fo 1-7-2017

Thus, all transport of goods by road is exempt except in case of GTA and courier services.

Meaning of ‘Goods Transport Agency” “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 para 2 of Notification No. 12/2017-CT (Rate) and No 9/2017-IT (Rate) both dated 28-6-2017, effective from 1-7-2017.

Courier Agency-Courier agency means any person engaged in the door-to-do transportation of time-sensitive documents, goods or articles utilising the services a person either directly or indirectly, to carry or accompany such documents, good or articles para 2 of Notification No. 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated 28-6-2017, effective from 1-7-2017.

Rate of GST on transporation by road 

The GST rate in case of service supplied by GTA on transportation of goods (including used household goods for personal use) is 5% (CGST 2.5% and SGST 2.5%) or IGST 5%. ITC of input services or goods is not available to GTA Notification No. 11/2017-CT (Rate) and No. 8/2017-IT (Rate) both dated 28-6-2017 effective from 1-7-2017

Note that the condition of non-availment of ITC is applicable where GTA himself is liable to pay tax and not where the recipient is liable to pay GST under reverse charge. Thus, once the recipient pays GST ( 5% (2.5% plus 2.5%) on reverse charge basis, he can avail its input tax credit

Option to pay GST 12% under forward charge- The GTA has option to pay GST 12% (6% plus 6%) under forward charge. In that case, the GTA can avail Input Tax Credit. Since the GTA himself will be paying tax, the recipient is not liable to pay GST under reverse charge (amendment wef 22-8-2017)

GTA who are having their own vehicles and having huge Input Tax Credit on capital goods may find the option useful. This option may also be suitable for freight forwarders who are providing composite services of packing, clearing and transportation from Source to destination basis.

Except these, dont think any GTA will go for this option.

Value to include diesel supplied free by customer:-  In Navodit Agarwal In re (2019) (AAR Chhattisgarh), the appellant was providing goods transport service of cement. The recipient of service was supplying diesel free to the appellant (transporter of goods) It was held that cost of free diesel is includible in value of goods transport service, as diesel is important and integral part of business process of transport of goods. (This can be justified on facts of the situation as GST rate of 5% is fixed considering this cost. Otherwise, normally, GST is payable only on what is supplied)

Reverse charge in respect of GTA services

In case of services of Goods Transport Agency (GTA), the service recipient is liable in most of the cases, as per Notification No. 13/2017-CT (Rates) and 10/2017 IT (Rates) both dated 28-6-2017, effective from 1-7.2017, except where the GTA opts to pay at under forward charge 12% (6% plus 6%) [amendment inserted wef 22-8-2017]

Person paying freight to GTA is liable to pay tax under reverse charge:  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 person who receives the service for the purpose of this notification.

Exemption to service provided by GTA to unregistered person (other than where reverse charge applies) In case of services supplied to unregistered person by GTA other than where reverse charge applies), the service is exempt wef 13-10-2017

In case where service is provided by GTA to factory, society, company, partnership firm or registered person, the recipient is liable to pay tax. Where GTA provides services to unregistered person, service is exempt.

This provision (of reverse charge by registered person) is not applicable where Government department, local authority or Government Agency is registered under GST only for purposes of TDS under section 51 of CGST Act proviso to  Sr No. 1 of Notification Nos 13/2017 CT (Rates) and 10/2017 IT (Rates) both dated 28-6-2017 inserted w.e.f. 1-1-2019.

In other words, GTA is not liable to pay GST under forward charge for services supplied to Government department, local authority or Government Agency. They will be treated as unregistered person for purpose of the exemption to GTA services, even they are registered under GST only for purposes of TDS under GST. If the Government department, local authority or Government Agency is registered under GST for purposes other than TDS, they will be liable to pay GST under reverse charge if they receive GTA services.

Thus, after 13-10-2017, the GTA itself is never liable to pay tax, except where the GTA opts to pay tax under forward charge @ 12% (6% plus 6%].

Till 13-10-2017 GTA was liable to pay GST in following cases

(a) when recipient of service is unregistered individual person
(b) transportation of household goods when the freight is paid by unregistered individual person
(c) Services supplied to person located outside taxable territory (like transport to Bhutan, Nepal. Bangladesh) where the recipient is paying freight.

Statutory wording The statutory provisions are as follows

In case of supply of Services by a goods transport agency (GTA) who has not paid tax at rate 12% (6% plus 6%) in respect of transportation of goods by road to-
a) any factory registered under or governed by the Factories Act, or
(b) any society regard under the Societies Registration Act, 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 (Body Corporate) has the same meaning as assigned  to it in section 2(11) of the Companies Act, 2013) or
(f) any partnership firm whether registered or not under any law including association of persons (It includes LLP)  or
(g) any casual taxable person located in taxable territory, the recipient of service located in taxable territory is liable to pay GST Notification No. 13/2017 CT (Rates and 10/2017-17 (Rates) both dated 28-6-2017, effective from 1-7-2017 [inserted wef 22-8-20171].

Mere bill is not consignment note :- In Nandganj Sihori Sugar Compnay Vs CCE (2014) (CESTAT), it was held that consignment note issued by GTA represents its liability to
(a) transport consignment handed over to it to destination
(b) undertake delivery of same to consignee and
(c) temporary store till delivery.
Mere bill issued for transportation of goods cannot be treated a Consignment Note.

Whether SGST and CGST is payable of IGST payable under Reverse charge if transporter is from out of State

There are divergent views. The issue a discussed in chapter Reverse Charge. The safe view seems to be to pay CGST and SGST/UTGST

Input Tax Credit of GST paid on GTA service is available to recipient

It was confirmed in para 24 of CBE&C Circular No. 97/8/2007 ST dated 23-8-2007 Consignor/consignee should pay service tax by cash. This principle applies to GST also.

Exemptions in respect of goods transport of specified goods

Services provided by a goods transport agency, by way of transport in a good carriage of following are exempt from GST
(a) agricultural produce
(b) goods, where consideration charged for the transportation of goods on a consignment transported in a single carnage does not exceed 1500
(c) goods, where consideration charged for transportation of all such goods for a single consignee does not exceed rupee 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 equipment – Notification No 12/2017 CT (Rate) and No 9/2017 IT (Rate) both dated 28-6-2017, effective from 1-7-2017.

A Exemption to service provided to Government etc. even if they are registered under GST for TDS purposes

Services provided by a goods transport agency, by way of transport of goods in a goods carriage by road, to –
(a) a Department or Establishment of the Central Government or State Government or Union territory or
(b) local authority or
(c) Government agencies which has taken registration under the Central Goods and Services Tax Act 2017 only for the purpose of deducting tax under section 51 of CGST Act and not making taxable supply of goods or services are exempt.

Exemption to supply of services to transit cargo to Nepal and Bhutan

Supply of services associated with transit cargo to Nepal and Bhutan (landlocked countries) has been exempted. Notification No. 12/2017 CT Rate) and No. 9/2017. Rate) both dated 28-6-2017 as amended on 29.9.2017

Services provided to unregistered person are exempt except services supplied to factory, society etc.

Services provided by a goods transport agency to an unregistered person including an unregistered casual taxable person, other than the following recipients namely
(a) any factory registered under or governed by the Factories Act, 1948 or
b) any Society registered under the Societies Registration Act, 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 Ser vices 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 Notification No 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated 28-6-2017 as amended on 13-10-2017.

Thus, after 13-10-2017, GTA is never liable to pay tax.

Exemption to service of giving vehicles on hire to GTA

Services by way of giving on hire to a goods transport agency. a means of transportation of goods is exempt from GST Sr No. 22(b) of Notification Nos. 12/2017-CT (Rate) and No 9/2017-IT (Rate) both dated 28-6-2017, effective from 1-7-2017.

Thus, there is no GST on vehicle given to GTA on hire (as many GTA do not have their own vehicles).

This hire may be with operator (under heading 9966) or without operator (under heading 9973) This distinction has been made wef 1-10-2019, Even earlier the exemption was available in both the cases There is no GST when goods transport vehicle is provided by one GTA to another GTA – Sarvana Perumal In re (2020)

GST on outward freight charged in tax invoice in case of FOR contracts

In case of FOR basis contracts, the supplier arranges transport. In that case, he pays GST under reverse charge on outward freight. He then charges outward freight the tax invoice. In such case, the outward freight charged is part of value of goods and GST is payable on value including outward freight. The rate is same as applicable to goods, as this is a composite supply as per section 2(30) of CGST Act.

It is not correct to charge freight separately and charge GST @ 5% [2.5% plus 2.5%] as the service of supplier of goods is not Goods Transport Agency Service at all.

Tax Invoice of Goods Transport Agencies

In case of goods transport agency (GTA) supplying taxable services in relation transportation of goods by road in a goods carriage, the GTA shall issue a tax invoice or any other document in lieu thereof, by whatever name called, containing
(a) the gross weight of the consignment
(b) name of the consignor and the consignee
(c) registration number of goods carriage in which the goods are transported
(d) details of goods transported
(e) details of place of origin and destination
(f) GSTIN of the person liable for paying tax whether as consignor, consignee or goods transport agency, and
(g) other information as prescribed under rule 46 of CGST Rules, 2017 Rule 54(3) of CGST and SGST Rules, 2017.

GST on Transport of goods by rail

Rail transport service of goods falls under tariff (service code) 996512 & GST rate is 5% (CGST 2.5% and SGST 2.5%) or IGST 5%. ITC of input services available but not of input goods.

Service of goods transport by vessel or rail within India exempt- Services by way of transportation by rail or a vessel from one place in India to another of the following goods is exempt from GST-
(a) relief materials meant for victims of natural or man de disasters, calamities, accidents or mishap
(b) defence or military equipment
(c)newspaper or magazines registered with the Registrar of Newspapers
(d) railway equipment or materials
(e) agricultural produce
(f) milk, salt and food grain including pulses and rice and
(g) organic manure-

Notification No. 12/2017-CT (Rate) No. 9/2017-IT (Rate) both dated 28-6-2017, effective from 1-7-2017. There is parallel exemption to goods transport in the vessel.

Water transport service of goods

Water Transport service of goods falls under group 99652.

The GST rate is 5% (CGST 2.5% and SGST 2.5%) IGST 5%. ITC input service available but not of input good. However, ITC of GST paid on ship, vessels including bulk carriers is available.

Exemption transport of goods by inland waterways Transport waterways is exempt from GST Notification No 12/2017 CT (Rate) and No. 9/2017 – IT Rate both dated 28-6-2017, effective from 1.7.2017

Service of goods transport by vessel within India exempt- Services by way of transportation by rail or a vessel from one place is India to another of the following goods is exempt from GST

(a) relief materials meant for victims of natural or man de disasters, calamities, accidents or mishap
(b) defence or military equipment
(c)newspaper or magazines registered with the Registrar of Newspapers
(d) railway equipment or materials
(e) agricultural produce
(f) milk, salt and food grain including pulses and rice and
(g) organic manure-

Notification No 12/2017 CT (Rate) and No. 9/2017 – IT Rate both dated 28-6-2017, effective from 1.7.2017.

Inland Waterways

Inland waterway means national waterways as defined in clause (h) of section 2 of Inland Waterways Authority of India Act 1985 (82 of 1985) or other way on any inland water, as defined in clause (b) of section 2 of the Inland Vessels Act 1917 (1 of 1917)

Meaning of National Waterway

As per Explanation to section 65(105)(zzzzl) , the meaning of the words national waterway will be as given in clause (h) of section 2 of the Inland Waterways Authority India Act, 1985.

Now in addition, The National Waterways Act, 2016 has been passed. This Act has been notified and made effective on 11-4-2016

Total 111 National Waterways have been declared under this Act.

Section 21(h) of Inland Waterways Authority of India Act, 1985 (as amended by The National Waterways Act. 2016) defines the words “national waterway as follows:

National waterway means the inland waterway declared by section 2 of the National Waterways Act, 2016 to be a national waterway.

Explanation-If Parliament declares by law any other waterway to be a national Waterway, then from the date on which such declaration takes effect, such other waterway
(i) shall be deemed also to be a national waterway within the meaning this clause; and
(ii) the provisions of this Act shall, with necessary modifications (including modification for construing any reference to the commencement of this Act as a reference to the date aforesaid), apply to such national waterway.

Earlier definition- Section 2(h) of Inland Waterways Authority of India Act 1985 had defined the words national waterway’ as follows

National waterway means the inland waterway declared by section 2 of the National Waterway (Allahabad – Haldia Stretch of the Ganga-Bhagirathi Hooghly River) Act 1982 (49 of 1982) to be a national waterway. Explanation If Parliament declares by law any other waterway to be a national waterway, then from the date on which such declaration takes effect, such other waterway
(i) shall be deemed also to a national waterway within the meaning of this clause, and
(ii) the provisions of this Act shall with necessary modifications (including modification for construing any reference to the commencement of this Act as a reference to the date aforesaid) apply to such national waterway.

Inward ocean transport from out of India

In case of inward ocean freight i.e. service supplied by person located in non-taxable territory to a person located in non taxable territory for transportation of goods by vessel from outside India upto customs station in India, the IGST rate is 5% subject to non-availment of ITC on input goods (ITC of tax paid on input services, and tax paid on ships, vessels and bulk carriers purchased can be taken) SGST and CGST cannot apply.

Reverse charge in case of CIF contracts- In case of CIF contracts of goods, the ocean freight is paid by foreign supplier of goods to foreign shipping company, In case of service of inward ocean transport supplied by a person outside India, the importer in India receiving the service is liable to pay GST under reverse charge.

The statutory wording is as follows

In case of services supplied by a person located in non- taxable territory by way of transportation of goods by a vessel from a place outside India up to the custom station of clearance in India, Importer, as defined in section 2(26) of the Customs Act. 1962(52 of 1962), located in the taxable territory is liable to pay tax (under reverse charge) Notification No. 10/2017 effective from 1.7.2017.

GST payable under reverse charge even if customs duty and IGST paid on CIF value at the time of import:-  GST is payable by importer under reverse charge even if customs duty and IGST paid on CIF value Bahi Paper Mills Ltd. In re [2018] AAR Uttarakhand)- E-DP Marketing (P) Ltd. In re (2019) (AAR Madhya Pradesh)

GST is payable under reverse charge on ocean freight in case of CIF Contracts- Chambal Fertilisers & Chemicals Ltd. In re [2018] (AAR Rajasthan)

Whether IGST payable or CGST and SGST UTGST payable?

There are divergent views and each view has its own merit. In our view, sale course is to pay CGST and SGST/UTCST The issue is discussed in chapter Reverse charge.

Rate at which GST payable under reverse charge on inward ocean freight

The IGST rate of 5% is subject to condition that input tax credit of input goods is not availed. Otherwise the general GST rate is 18%

As per CBI&C circular No 206/4/2017-ST dated 13-4-2017, since the foreign shipping line is not registered under GST, it cannot avail the concessional rate of 5%.  In that case. GST is payable under reverse charge @ 18%.

However, this view does not seem to be correct In SRF Ltd v. CC (2015) (SC) Assessee imported Nylon Filament Yarn. The yarn was exempt from excise duty if no Cenvat credit was taken. Since the goods were imported, said condition could not be fulfilled. It was held that an imported article is one which has been manufactured or produced, then it must be presumed for purpose of CVD that such an article can likewise be manufactured or produced in India. Actual manufacture in India is not required. Hence, assesse was eligible for exemption from CVD.

Applying principle of this judgment, the GST should be payable @ 5%.

Mode of calculation GST payable on ocean freight w.e.f. 1-7-2017 in case of CIF Contracts

Usually, when contract with foreign supplier is on CIF basis, the Indian importer is not aware of exact amount of freight and insurance.

As per Explanation to Notification No. 8/2017 CT dated 28-6-2017 (corrigendum dated 30-6-2017), where the value of taxable service provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India is not available with the person liable for paying integrated tax the same shall be deemed to be 10% of the CIF value (sum of cost, insurance and freight) of imported goods.

Thus, the ocean freight should be taken as 10% of CIF Value of the goods.

The provision of making liable importer liable to pay tax on inward ocean freight invalid

Section 5(3) of CGST Act provides that a recipient of service can be made liable to pay tax on reverse charge basis. Section 2(98) of CGST Act which defines reverse charge also clarifies that only recipient of service can be made liable to par service tax under reverse charge. In case of CIF contract, the contract for transport of goods is between foreign supplier and foreign shipping company. Payment for ocean freight from foreign country to India is made by foreign supply. In that case how an importer in India can be treated as recipient of service? The recipient of service of ocean freight is foreign supplier and not Indian importer, though he may be importer of goods

In view of this, validity of the provision of making importer in India liable to pay tax under reverse charge is highly doubtful.

 ln Mohit Minerals (P) Ltd v. Union of India (2020] (Gu HC DB) imposition of GST on ocean freight in case of CIF contract has been held invalid, as service recipient is out of India.

Outward ocean freight in CIF contracts exempt from GST from 25-1-2018 to 30-9-2020

In case of CIF contracts entered into by Indian exporter, the outward ocean freight is paid by Indian exporter to Indian shipping company. In that case, the place of supply service is the location of recipient of service (i.e, Indian exporter) as per section 12(8)(a) of IGST Act. In that case, the shipping company in India was liable to pay @5% (IGST-5% or CGST @ 2.5% plus SGST/UTGST 2.5%) upto 25-1-2018.

Now Services by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India are exempt from tax from 25-1-2018. This exemption will cease on 30-9-2020 – Sr. No. 19(b) of Notification Nos. 12/2017 CT (Rate) and No. 9/2017-IT (Rate) both dated 28-6-2017 amended wef 1-10-2019 earlier it was amended on 25-1 2018 and further amended on 26.7.2018).

Air transport service of goods

Air transport service of goods falls under group 99653

The tax rate is 18% [IGST 18% or CGST 9% plus SGST/UTGST 9%]

Inward air transport service from out of India is exempt Air transport of goods from a place out of India upto the customs station of clearance in India is exempt from GST-Notification No. 12/2017 CT (Rate) and No. 9/2017-IT (Rate) both dated 28-6-2017, effective from 1-7-2017.

Outward air freight in CIF contracts exempt from GST upto 30-9-2019

In case of CIF contracts entered into by Indian exporter, the outward air freight is paid by Indian exporter to Indian airline company. In that case, the place of supply of service is the location of recipient of service (i.e. Indian exporter), as per section 12(8)(a) of IGST Act. In that case, the Indian airline company in India was liable to pay tax@ 18% [IGST 18% or CGST 9% plus SGST/UTGST @9%) up to 25-1-2018

Now, Services by way of transportation of goods by an aircraft from customs station of clearance in India to a place outside India are exempt from tax from 25-1-2018 This exemption ceased on 30-9-2020 Sr No. 19A of Notification Nos. 12/2017 CT (Rate) and No. 9/2017-IT (Rate) both dated 28-6-2017 amended wef 1-10-2019 (earlier it was amended on 25-1-2018 and further amended on 26-7-2018)

Transport of petroleum products through pipeline

Transport of natural gas, petroleum crude, motor spirit (commonly known as petrol) high speed diesel or aviation turbine fuel through pipeline falls under heading 9965.

The GST rate is 5% [IGST 5% or CGST 2.5% plus SGST/UTGST-2.5%), Input tax credit is not available Notification No. 11/2017 CT (Rate) and No. 8/2017-IT (Rate) both dated 28-6-2017, effective from 13-10-2017.

If input tax credit is availed GST rate will be 18% [IGST 18% or CGST 9% plus SGST UTGST.9%)

Cargo handling services

Cargo handling services fall under group 99671

Cargo is understood to denote goods which are ready for transportation, whereas packing is a stage prior. Thus, mere packing is not cargo handling – Signode India vs CCE (2017).