Providing Freight Service to HPCL on Petriol Pump

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CA Ashok Jain (Querist)
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15 October 2019 My Client is running a petrol pump. He has purchased a Oil tanker for carrying petrol or diesel on behalf of HPCL. My First question is whether my client is eligible for input of Gst of oil Tanker. Second Question is that Whether My Client have to pay gst on freight charges OR HPCL have to pay reverse charge on such freight.

CA Dileep Surya Kumar

CA Dileep Surya Kumar (Expert)
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15 October 2019 1. Is he providing transportion service and opted for forward charge ? if so he can take input credit. otherwise He can't take input credit.
2. the person who is paying freight charges to the transporter need to pay under RCM provided the transporter not in forward charge.

CA Ashok Jain

CA Ashok Jain (Querist)
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15 October 2019 1. Whether it is optional for us for adopting forward charge or compulsory for forward charge.
2. As per main business is of petrol pump and is it reverse charge is applicable on transportation service provided by us.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 Here’s a detailed breakdown to address your questions about GST on freight services provided to HPCL and the eligibility for input tax credit on the oil tanker:

### 1. Input GST on Oil Tanker

**Eligibility for Input Tax Credit (ITC):**

- **Eligibility**: Yes, your client is eligible for input tax credit (ITC) on the purchase of the oil tanker used for transporting petrol or diesel, provided the oil tanker is used for business purposes and the GST paid on its purchase is properly accounted for.
- **Conditions**: The credit can be claimed if:
- The oil tanker is used in the course of business.
- The invoice for the purchase is in the name of your client, and the GST is correctly reflected on it.
- The credit is claimed in accordance with the provisions of the GST Act, specifically Section 16 of the CGST Act, 2017.

### 2. GST on Freight Charges

**Freight Charges and Reverse Charge Mechanism (RCM):**

- **General Rule**: Typically, freight charges for transportation services are subject to GST under the forward charge mechanism, i.e., the supplier of the service charges GST and collects it from the recipient.
- **Reverse Charge**: For certain transportation services, such as those provided to a registered person (in this case, HPCL), the reverse charge mechanism may apply.

**For Your Scenario:**

1. **Forward Charge or Reverse Charge**:
- **Forward Charge**: Generally, if your client is providing freight services, they would be required to charge GST and pay it forwardly, unless a specific provision applies.
- **Reverse Charge**: Under the GST regime, certain services such as transportation of goods by road can be subject to reverse charge if the recipient is a registered person and the service provider is not required to pay GST. In this case, HPCL, being a large corporation and registered taxpayer, might be liable to pay GST under reverse charge for the freight services provided by your client.

2. **Applicability of Reverse Charge**:
- **Reverse Charge Mechanism**: If the reverse charge mechanism applies, HPCL would be responsible for paying GST on the freight charges directly to the government. Your client should issue a bill without GST and indicate that the reverse charge is applicable.

**Key Considerations:**

- **Compulsion or Option**: It is not optional; the application of forward charge or reverse charge depends on the nature of the service and the applicable GST rules. The GST Council and CBEC (Central Board of Indirect Taxes and Customs) issue notifications and guidelines that specify whether forward charge or reverse charge should be applied.

- **Notifications and Rules**: Ensure to check the relevant GST notifications, particularly those related to transportation services and reverse charge mechanisms. These are periodically updated and specify the conditions under which reverse charge applies.

### Summary:

1. **Input GST**: Your client can claim ITC on the purchase of the oil tanker if used for business purposes.
2. **Freight Charges**:
- **Forward Charge**: Typically, freight charges are subject to forward charge GST unless otherwise specified.
- **Reverse Charge**: For certain services, like those provided to registered entities, reverse charge might apply. HPCL may be liable to pay GST under reverse charge for the freight services, based on specific GST rules.

It is recommended to consult with a GST expert or tax advisor to confirm the applicability of reverse charge in your specific case and ensure compliance with the latest GST regulations and notifications.