GST On Goods Transport Services In India
The relationship between economic growth and infrastructure investment is very evident. The faster the economy grows, more the need for faster and reliable mode for transport for movement of goods and people. High growth of Indian economy is driving the demand for transportation industry. The transportation industry is classified into majorly four segments i.e. aviation, roads, water and railways. India has a road network of 5.23 million kilometres. Transportation industry contributed roughly 6.3% of GDP and is majorly dominated by road sector. More than 50% of freight is handled by road.
Various Types of Transportation Mode:
Goods can be transported from one place to another by the following mentioned way .i.e.
5. Through pipe line
In this article, we will discuss about the Road transport service of goods.
Structure of Road Transport Service of Goods Industry:
Before going into the taxability aspect of this Industry, we must understand the Industry as such and how it functions.
The starting point is the consignor who wants to send goods to the consignee. The consignor has two options i.e either he himself transports on his own or contacts to a Goods Transport agency i.e. known as GTA. If he himself transports then the chain ends there itself, otherwise the chain moves. The GTA has 2 options i.e. he transports on his own vehicle or he hires. If the GTA transports on his own vehicle the chain ends. If he hires then there are 2 options i.e. he can hire individually or he can contact different Associations to hire vehicle.
1. CONSIGNOR TRANSPORTS ON HIS OWN VEHICLE :
In this case, the transport cost will be added to the cost of the goods and the GST will be applicable to the goods itself. Here there will be no separate GST for transport.
2. THE TRANSACTION BETWEEN CONSIGNOR AND GTA :
Before going to the Tax aspect we must understand who is a GTA.GTA means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.
The transaction between GTA and the consignor can be taxable in 3 ways i.e Reverse charge basis and forward charge basis and Exempt.
i.Reverse Charge Basis:
In this case, the service recipient i.e. consignor in our case is liable to pay tax @ 5% as per notification no. 13/2017- CT (Rates) and 10/2017 IT (Rates) both dated 28-06-2017 effective from 1.07.2017. The GST paid by the service recipient/ consignor is eligible to be taken as input for the recipient/consignor.
ii.Forward Charge Basis:
There are 2 options available for GTA in case of forwarding charge i.e, the tax has to be paid by the GTA himself.
1. GTA can opt to pay @ 5% GST as per Notification No 11/2017 CT (Rate) and 8/2017 IT (Rate) both dated 28.06.2017 effective from 1.07.2017. Here, in this case, ITC of input service or goods is not available to GTA.
2. The GTA has also an option to pay GST @ 12% under forwarding charge. In that case, the GTA can avail ITC.
GTA who are having their own vehicle and having huge input tax credit on capital goods may find the option useful.
There are 3 cases where the service provided by GTA to consignor is exempt. They are
1. When GTA provides service to an unregistered person i.e. where a consignor is an unregistered person, then the transaction is exempt from GST w.e.f. 13.10.2017 except the GTA has not opted for forwarding charge option.
2. When GTA service is provided to the specific goods mentioned below are exempt from GST. These are
a. Agricultural Produce
b. Goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed Rs 1,500.
c. Goods, where consideration charged for the transportation of all such goods for a single consignee does not exceed Rs 750.
d. Milk, salt, and food grain including flour, pulses, and rice.
e. Organic manure
f. Newspapers or magazines registered with the Registrar of News Papers,
g. Relief materials meant for victims of natural or manmade disasters, calamities, accidents, or mishaps or
h. Defense or military equipment
Notification No- 12/2017 CT (Rate) and 9/2017 IT (Rate) both dated 28.06.2017 effective from 1.07.2017.
3. The supply of services associated with transit cargo to Nepal and Bhutan ( Landlocked countries) has been exempted. Notification No- 12/2017 CT (Rate) and 9/2017 IT (Rate) both dated 28.06.2017 as amended 29.06.2017.
3. THE TRANSACTION BETWEEN GTA AND THE PERSON FROM WHOM HE HIRES:
The transaction between GTA and the person from whom he hires irrespective of who he is i.e. individual or Associations is exempt. As per notification no- 12/2017 CT (Rate) and 9/2017 IT (Rate) both dated 28.06.2017 effective from 1.07.2017.
Services by way of transportation of goods by road except for the services of
i. A goods transport agency (GTA).
ii. A courier agency
is exempt from GST.
Thus, all transport of goods by road is exempt except in the case of GTA and courier agency.