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Thursday, August 4, 2022

RCM on GTA Services

RCM on GTA Services

In this article, we will discuss the applicability of GST on transport of goods by Goods Transport Agency.

Relevant Section: Section 9 of CGST Act 2017

Relevant Notification: Notification No. 11/2017 – Central Tax (Rate) dated 28/06/2017 (defines GTA)

Relevant Notification: Notification No. 12/2017 – Central Tax (Rate) dated 28/06/2017 (exemption)

Relevant Notification: Notification No. 13/2017 – Central Tax (Rate) dated 28/06/2017 (puts under RCM)

Relevant Notification: Notification No. 20/2017 – Central Tax (Rate) dated 22/08/2017 (option to opt Forward Charge)

Relevant Notification: Notification No. 22/2017 – Central Tax (Rate) dated 22/08/2017 (amendment to 13/2017 CGST Rate)

Clarification by CBIC: Clarification on Person Liable to Pay GST on GTA services

Relevant Notification: Notification No. 05/2022 – Central Tax (Rate) dated 13/07/2022 (amendment to 13/2017 CGST Rate)

Table of contents

  1. Who is considered as GTA and who is not?
  2. Is GTA liable to register under GST?
  3. GST on GTA Services: Forward Charge vs RCM
  4. Exemption from GST on GTA Services
  5. Place of Supply for GTA Services

Who is considered as GTA and who is not?

Notification No. 11/2017 – Central Tax (Rate) dated 28/06/2017 defines “goods transport agency”.

Definition of GTA: Goods Transport Agency (GTA) means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.

Definition of Consignment Note: A consignment note is a serially numbered document and contains some basic details such as – Name of consignor, Name of consignee, Registration number of the goods carriage, Details of the goods, Place of origin, Place of destination, Person liable to pay GST – consignor, consignee, or the GTA.

If a consignment note is issued, it means that the lien on the goods has been transferred to the transporter. Now the transporter is responsible for the goods till its safe delivery to the consignee.

If consignment note is not issued, the service provider will not be called GTA.

Is GTA liable to register under GST?

As per Notification No. 5/2017- Central Tax dated 19/06/2017, GTA does not have to register under GST if he is exclusively transporting goods to a registered person (even if the turnover exceeds the threshold limit). The total tax is required to be paid by the recipient under reverse charge basis.

If GTA is transporting goods of unregistered dealer then the threshold limit will be applicable for GST registration.

GST on GTA Services: Forward Charge vs RCM

Notification No. 13/2017 – Central Tax (Rate) dated 28/06/2017 clarifies that GST had to be paid under RCM (if GTA not paying under forward charge added vide Notification No. 05/2022 Central Tax Rate w.e.f. 18/07/2022) by the recipient at 5% Rate of Tax. And no ITC was allowed to GTA. Although the person who paid the tax under RCM could take ITC.

Since in this arrangement GTA were not able to take ITC of inputs and capital goods (28%), the goods transport industry representatives requested the government to allow GTA to charge GST on forward charge basis.

Notification No. 20/2017 – Central Tax (Rate) dated 22/08/2017: Now GTA could opt to pay (this implies forward charge) central tax at 6% (and state tax of 6%) on all the services. And they can take ITC for their inputs and capital goods.

📝 Note: GTA cannot pay on forward charge at 5% till 17/07/2022 even if they do not take ITC. As Notification No. 13/2017 was amended by Notification No. 22/2017 CGST (Rate) to include the words “who has not paid central tax at the rate of 6%”. Later on the words "who has not paid central tax at the rate of 6%" were removed vide Notification No. 05/2022 w.e.f. 18/07/2022.

So, in a nutshell GTA can now pay 5% under forward charge or ask recipient to pay 5% under RCM without GTA availing ITC of his input goods. OR GTA can charge 12% under forward charge and avail ITC on his input goods. This option of 5% under forward charge was not there till 17/07/2022.

Exemption from GST on GTA Services

There are mainly three kinds of exemptions to note.

Item based exemption:

  1. agriculture produces
  2. milk, salt, food grains
  3. newspaper, magazine
  4. organic manure
  5. disaster relief material
  6. defence equipment

Value based exemption:

  1. where the gross amount charged for transportation for a consignment transported in a single carriage does not exceed Rs. 1,500.
  2. where consideration charged for transportation of all such goods for a single consignee does not exceed Rs. 750.

Entity based exemption:

  1. Department or Establishment of central/state government
  2. local authority
  3. Governmental agencies

📝 Note: Transporation services by road are exempted except the services by GTA and courier agency. So, if a transporter does not issue consignment note then he is not treated as GTA and hence he is exempted from GST by way of Sl. No. 18 of Notification No. 12/2017 – Central Tax (Rate) dated 28/06/2017.

Place of Supply for GTA Services

RecipientPlace of Supply
Registered PersonLocation of Registered Recipient
Unregistered PersonLocation where such goods are handed over for the transportation

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