The tax system in India has also been simplified through the Goods and Services Tax (GST), which has unified various indirect taxes into a single law. Among some of the areas, GST on Goods Transport Agency (GTA) services is one of them. Given that the transport of goods is a fundamental component of trade and logistics and, therefore, GST has a significant impact on the services offered by GTA, it is important to learn more about this matter, both as a business and a carrier.
Meaning Goods Transport Agency (GTA)
According to the Central Tax (Rate), Goods Transport Agency (GTA) is any individual who offers transporting goods services using the road and who issues a consignment note. It is the fact that a transporter is issued with this consignment note that makes him a GTA.
When a transporter transfers goods without a consignment note, he is not considered a GTA with GST and will not pay tax. The consignment note is evidence of goods transfer and the responsibility of the carrier.
GST Applicability of GTA Services
The GST service on GTA service applies to the services transported by road, which are issued on a consignment note by an agency. There are two methods of charging GST under the law:
- Forward Charge Mechanism (FCM): The GST is paid by the GTA and is collected by the customer.
- Reverse Charge Mechanism (RCM): The services are paid by the recipient of services in lieu of GTA.
The mechanism that is applicable is determined by whether the GTA will pay tax in the system of forward charge or give the recipient the system of reverse charge.
GST Rates to be Applied on GTA Services
There are two GST rates on GTA services based on the Notification No. 03/2022 – Central Tax (Rate):
- 5% GST (excluding Input Tax Credit – ITC) in case the GTA do not claim ITC.
- GST of 12% including ITC, in case the GTA pays through the forward charge system and claims ITC.
In the case where the GTA fails to select the 12% option, then the reverse charge mechanism is automatically imposed, where the tax burden is paid by the recipient of the service.
Rates of GST for GTA
| SL. NO. | PARTICULARS | RATE OF GST |
| 1 | Any goods that are not specified below | – GST Rate 2.5% (CGST+SGST) or 5% IGST The rate can be availed if GTA does not take credit for input tax paid on goods and services used in providing services. – GST Rate 6%% (CGST+SGST) or 12% IGST This provision states that when the goods transport agency opts to pay tax at a rate of 6%, it shall henceforth be liable to pay tax at the same rate on all services pertaining to GTA provided by it. |
| 2 | Carrying, – agricultural produce, milk, salt, and food grains, including flour, pulses, and rice – organic manure – newspapers or magazines that are registered with the Registrar of Newspapers of the country – relief materials that are targeted at people who have suffered from loss due to natural or man-made disasters – defence or military equipment |
0% |
| 3 | Carrying goods, where payment is less than INR 1,500, and this is the consideration charged for the transportation of goods on a consignment transported in a single carriage | 0% |
| 4 | Carrying goods, where the price charged for transportation of all such goods for a single consignee does not exceed INR 750 | 0% |
| 5 | Used household goods for personal use | 0% |
| 6 | Transporting goods belonging to persons who are not registered under the GST Laws | Earlier, I was exempt, but now I have been made taxable, and I have not yet been notified. |
| 7 | Transporting goods of casual taxable persons who are not registered under the GST Act or Laws | Earlier, I was exempt, but now I have been made taxable, and I have not yet been notified. |
| 8 | Transporting goods -GST paid by GTA | 5% with no ITC or 12% with ITC |
| 9 | Hiring out a vehicle to a GTA | 0% |
Reverse Charge Mechanism (RCM)
In the Reverse Charge Mechanism, the GST is paid by the receiver of the GTA service. According to Section 9(3) of the CGST Act, 2017, the following types of recipients will have to pay GST under RCM when they are availing GTA services:
- Registered factories and manufacturing units.
- Societies and co-operative societies.
- Body corporates, partnership firms (including LLPs).
- Individuals registered under GST.
Nevertheless, in the case of individuals or unregistered small traders, GTA is liable for payment of GST using the forward charge mechanism.
Forward Charge Mechanism (FCM)
In the Forward Charge Mechanism, the GTA bears the payment of GST of 12 percent, and it collects the same on behalf of the customer. This is the choice that must be made by GTA at the beginning of the financial year.
The merit of this system lies in the fact that the GTA should be able to claim the Input Tax Credit (ITC) on such expenses as vehicle maintenance, fuel, and business services. Large transporters that primarily deal with registered businesses tend to prefer it.
GTA Services exemptions to GST
Some of the GTA services are not subject to GST in Notification No. 12/2017 – Central Tax (Rate). These include:
- Agricultural produce transportation.
- Freight per consignment not more than Rs. 1,500.
- Freight per consignee not in excess of Rs. 750.
- Delivery of newspapers, military or supply cargo.
- Movement of goods by non-GTA or non-registered individuals.
The purpose of these exemptions is to decrease the tax liability of small-scale transporters and necessary products.
Registration Obligation of GTA under GST
A Goods Transport Agency should be registered under GST and has the following requirements:
- Gives forward charge taxable services, or
- Has a turnover of more than Rs. 20 lakh/ Rs. 10 lakh in special category states.
When a GTA merely offers services in a reverse charge manner, he is not obliged to be registered because the fee is applied directly to the receiver.
GTA Services Input Tax Credit (ITC)
The Input Tax Credit is available based on the approach that the GTA has taken.
- The GTA is allowed to deduct the ITC on all expenses that are related to business at less than 12 percent forward charge.
- When price is below 5 percent of the reverse charge, no ITC is provided since the beneficiary has to pay the GST.
Transporters whose input costs are high would tend to use the forward charge in order to enjoy ITC.
Documentation and Compliance
A GTA needs to provide a consignment note which contains:
- Designations of consignor and consignee.
- Goods carriage registration number.
- Description of goods.
- Location of source and where to.
- GSTIN of the GTA.
An appropriate GST invoice should also be provided with the mention of the SAC code, taxable value, and charge rate. According to the GST law, GTA should submit periodic returns (i.e. GSTR-1 and GSTR-3B), and keep financial and transport records of at least six years.
Key Compliance Advice to GTA Operators
Under GST, compliance in the services of GTA should be consistent and precise. It is essential to file returns in a timely manner, issue invoices accurately, and maintain detailed consignment records. Classification of services should be done appropriately under SAC 9965 to avoid mistakes in reporting and disputes during the audit.
Conclusion
The GST on GTA services in India has provided a well-planned tax system for the transportation and logistics sector. The option of the 5 percent reverse charge and the 12 percent forward charge mechanisms offers flexibility depending on the size and nature of the business model of the transporter.
Small transporters enjoy exemptions and simplified compliance, whereas registered GTAs must maintain proper records and file them on time. Knowledge of GST rates, exemptions, ITC regulations, and documentation ensures that businesses and transporters are compliant and efficient in their financial operations.
In brief, the GST law on GTA services promotes fairness in taxation between transporters and service consumers, ensuring transparency, consistency, and efficiency in the functioning of the road transport sector in India.
Related Services
