Update -
In the 50th GST Council meeting on July 11, 2023, it was decided that Goods Transport Agencies (GTAs) will no longer be required to file a declaration for paying GST under the forward charge mechanism. If GTAs have chosen this option for a particular financial year, it will be considered valid for the next and future financial years unless they file a declaration to revert to the reverse charge mechanism (RCM). The deadline for exercising this option will be March 31 of the preceding financial year, and the option can be exercised starting from January 1 of the preceding financial year. These decisions will come into force once notified by the CBIC.
From July 18, 2022, the exemptions for single carriage consignments up to INR 1,500 and/or single consignees up to INR 750 have been removed. As a result, any value of supplies made by a Goods Transport Agency will be subject to taxation under either the forward charge or reverse charge mechanism under GST.
GTA providing services of road transportation of goods is taxable under GST. The tax can be paid by the transporter under forward charge or it can be paid by the recipient on reverse charge basis (where applicable). The rate of tax under forward charge is at 12% with ITC available or 5% without the benefit of ITC. Under the reverse charge, the rate is 5%.
Under the reverse charge mechanism, the liability to pay GST gets shifted to the recipient of GTA service. The RCM provisions are contained in the notification No. 13/2017 of Central Tax (Rate) dated 28th June 2017, as amended from time to time. Further notification No. 12/2017 of Central Tax (Rate) dated 28th June 2017 provides the list of services on which GST is exempted. At serial no.21 of this notification the exemption to GTA services is mentioned and reads as under-
"Services provided by a goods transport agency, by way of transport in a goods carriage of -
(a) ...................................
(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) to (h) ......................................
As you will see from the above, there are 2 exemptions - Single carriage Rs.1,500 and Single consignee Rs.750.When you avail the services of GTA and assume that GTA is not charging GST on a forward charge basis then as a recipient of service you are required to discharge the GST liability under RCM provisions. In case the freight payable is more than Rs.750/- but less than Rs.1,500/- then you will have to be clear whether you are eligible for the above exemption or not. Therefore, it is important to understand the meaning and applicability of these exemptions.
1. Single Carriage < Rs.1,500
This is a case where a tuck/tempo carries the goods and delivers to the consignee. There are no other consignments in the truck being transported for other consignees. For example, XYZ limited asks a transporter to bring their furniture from Mumbai to Pune. The total freight payable for this transportation service is Rs.1,400. Here the GST will be exempted as freight for this single carriage is less than Rs.1,500/-.
2. Single Consignee < Rs.750
In this case there are more than one packages in the truck to be delivered to more than one consignee. For example, continuing the above example let us assume that apart from the consignment of XYZ limited, the transporter is also carrying the consignment packages for ABC ltd and EFG Ltd. The freight payable by ABC ltd is Rs.900/- and that by EFG ltd is Rs.650/-. This scenario will get covered under the exemption given above at (c) and the limit of Rs.750/- will need to be considered for each of these 3 consignees. Thus, there will be no exemption for transportation charges payable by XYZ ltd and ABC ltd as the amounts are above Rs.750/-.Exemption will be available in the case of EFG ltd as the freight amount of Rs.600/- is lower than Rs.750/- This limit needs to be seen for single consignee.
The practical aspects of availing the exemption are quite challenging. How in the above case XYZ ltd will substantiate that it is entitled for exemption under clause(b).It will have to prove that there were no other consignments in the truck carrying the material. There is no document in the possession of XYZ which can prove it. So it will have to obtain a declaration from the transporters that the truck carried the goods for other consignees also. To avoid any litigation on this, the Govt. should simplify the exemption condition.
Hope the above will help the taxpayers to clarify the doubt and confusion prevailing.
Disclaimer- The above views are personal.
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