Reverse Charge Mechanism in GST- GTA Services - GST Ready Reckoner - GST

Background of levying tax on the services of Goods Transport Agency The levy of Service Tax on Road Transportation Service has always been a contentious issue. The Finance Act, 1997 had levied Service Tax on Goods Transport Operators w.e.f. 16- 11-1997 which was subsequently withdrawn after nationwide strike. Thereafter by the Finance (No. 2) Act, 2004 Service Tax was imposed on Transport of Goods by Road service rendered by a goods transport agency with effect from 10-09-2004. However, the levy was deferred until further notice again in view of transporters strike. The Government thereafter constituted a Committee to deal with the issue and after taking into account the recommendations of the Committee, Notification Nos. 32 to 35/2004 ST all dated 03-12-2004 were issued, levying tax on Transport of Goods by Road with effect from 01-01-2005. The legal position prevailing under Service Tax is being continued under the GST regime. The services of transportation of goods by road (except services of GTA) continue to be exempt even under the GST regime. In so far as the services of GTA is concerned, if the services (of Goods Transportation) are provided (by the GTA) to specified classes of persons, the tax liability falls on such recipients under the reverse charge mechanism. The following discussion will clarify the position Who is a GTA Goods Transport Agency? As per Notification 12/2017 dated 28.06.2017 Clause (ze) goods transport agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called; Thus, it can be seen that issuance of a consignment note is the sine-qua-non for a supplier of service to be considered as a Goods Transport Agency. If such a consignment note is not issued by the transporter, the service provider will not come within the ambit of goods transport agency. If a consignment note is issued, it indicates that the lien on the goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till its safe delivery to the consignee. It is only the services of such GTA, who assumes agency functions, that is being brought into the GST net. Transportation of Goods by Road In terms of Notification no. 12/2017-Central Tax (Rate) dated 28.06.2017 (sr.no.18), the following services are exempt from GST Services by way of transportation of goods (Heading 9965)- (a) by road except the services of (i) a goods transportation agency; (ii) a courier agency; (b) by inland waterways. Thus, it is to be seen that mere transportation of goods by road, unless it is a service rendered by a goods transportation agency, is exempt from GST. Note :- Individual truck/tempo operators who do not issue any consignment note are not covered within the meaning of the term GTA. As a corollary, the services provided by such individual transporters who do not issue a consignment note will be covered by the entry at s.no.18 of notification no.12/2017-Central Tax (Rate), which is exempt from GST. What is a consignment note? Consignment Note is neither defined in the GST Act nor in the notification no.12/2017-Central Tax (Rate). Explanation to Rule 4B of Service Tax Rules, 1994. In terms of the said rule, consignment note means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage, which is serially numbered, and contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, details of the place of origin and destination, person liable for paying service tax whether consignor, consignee or the goods transport agency. Charge of GST on services provided by GTA In terms of notification no. 11/2017-Central Tax (Rate) dated 28.06.2017, against serial number 9 , as amended time to time [ as amended by notification no. 20/2017- Central tax (Rate) dated 22.08.2017, Notification No. 03/2022- Central Tax (Rate) New Delhi, the 13th July, 2022 ] . Supply of Services Rate of GST Other conditions (iii) Services of Goods Transport Agency (GTA) in relation to transportation of goods (including used house hold goods for personal use) supplied by a GTA where,- (a) GTA does not exercise the option to itself pay GST on the services supplied by it; 2.5 The credit of input tax charged on goods and services used in supplying the service has not been taken. [Please refer to Explanation no. (iv)] (b) GTA exercises the option to itself pay GST on services supplied by it. 2.5 (1) In respect of supplies on which GTA pays tax at the rate of 2.5%, GTA shall not take credit of input tax charged on goods and services used in supplying the service. [Please refer to Explanation no. (iv)] (2) The option by GTA to itself pay GST on the services supplied by it during a Financial Year shall be exercised by making a declaration in Annexure V on or after the 1st January of the preceding Financial Year but not later than 31st March of the preceding Financial Year. Form For exercising this option Making a declaration in Annexure V before the due date mentioned below. They can navigate Services User Services Opting Forward Charge Payment by GTA (Annexure V), after login, to submit their option on the portal. Due Date for exercising option For the Financial Year 2022-2023 shall be exercised on or before the 16th August, 2022. For the Financial Year 2023-2024 shall be exercised on or before the 31 st May, 2023. From the Financial year 2024-25 shall be exercised on or before 1st January of the preceding Financial year but not later than 31st March of the preceding financial year. Issue invoice That invoice for supply of the service charging Central tax at the rates as applicable to clause (b) may be issued during the period from the 18th July,2022 to 16th August, 2022 before exercising the option for the financial year 2022-2023 but in such a case the supplier shall exercise the option to pay GST on its supplies on or before the 16th August,2022. For commencement of new business A GTA who commences new business or crosses threshold for registration during any Financial Year, may exercise the option to itself pay GST on the services supplied by it during that Financial Year by making a declaration in Annexure V before the expiry of forty-five days from the date of applying for GST registration or one month from the date of obtaining registration whichever is later. Option for Optout from forward charg The option exercised by GTA to itself pay GST on the services supplied by it during a Financial Year shall be deemed to have been exercised for the next and future financial years unless the GTA files a declaration in Annexure VI to revert under reverse charge mechanism on or after the 1st January of the preceding Financial Year but not later than 31st March of the preceding Financial Year. Explanation (iv) Wherever a rate has been prescribed in the notification 11/2017 subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been taken, it shall mean that,- (a) credit of input tax charged on goods or services used exclusively in supplying such service has not been taken; and (b) credit of input tax charged on goods or services used partly for supplying such service and partly for effecting other supplies eligible for input tax credits, is reversed as if supply of such service is an exempt supply and attracts provisions of section 17(2) of the CGST Act, 2017 and the rules made thereunder. Summary Rate of GST Nature of charge Applicability Notification (as amended time to time) Under Reverse Charge @ 5% For services to Specified category of person 11/2017 -Central Tax (Rate) Under Forward Charge @ 5% For Service to other than specified category of person GTA don't wish to avail ITC 11/2017 -Central Tax (Rate) Under Forward Charge @ 12% For Service to other than specified category of person GTA don't wish to avail ITC 11/2017 -Central Tax (Rate) Revers charge applicability in case of supply of service by the goods transport agency (GTA) [ Notification no. 13/2017- Central Tax (Rate) , the 28th Jun, 2017, as amended time to time ] Category of Supply of Services Supplier of service Recipient of Service Supply of Services by a goods transport agency (GTA) in respect of transportation of goods by road to- (a) any factory registered under or governed by the Factories Act, 1948;or (b) any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India; or (c) any co-operative society established by or under any law; or (d) any person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act ; or (e) any body corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or (g) any casual taxable person. Goods Transport Agency (GTA) (a) Any factory registered under or governed by the Factories Act, 1948; or (b) any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India; or (c) any co-operative society established by or under any law; or (d) any person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act ; or or (e) any body corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or (g) any casual taxable person; located in the taxable territory. Not applicable Revers charge applicability in case of supply of service by the goods transport agency (GTA) to in following cases [ Notification no. 13/2017- Central Tax (Rate) , the 28th Jun, 2017, as amended time to time ] Supply of services provided by a goods transport agency, by way of transport of goods in a goods carriage by road, to, - (a) a Department or Establishment of the Central Government or State Government or Union territory; or (b) local authority; or (c) Governmental agencies, which has taken registration under the CGST Act, 2017 only for the purpose of deducting tax under section 51 and not for making a taxable supply of goods or services. If the supplier has taken registration under the CGST Act, 2017 and exercised the option to pay tax on the services of GTA in relation to transport of goods supplied by him under forward charge ; and the supplier has issued a tax invoice to the recipient charging Central Tax at the applicable rates and has made a declaration as prescribed in Annexure III on such invoice issued by him. Annexure III Declaration I/we have taken registration under the CGST Act, 2017 and have exercised the option to pay tax on services of GTA in relation to transport of goods supplied by us from the Financial Year ...........under forward charge and have not reverted to reverse charge mechanism. GTA services specifically exempt [ Notification no.12/2017-Central Tax (Rate) dated 28.06.2017 ] In terms of the following services provided by a GTA (Heading 9965 or 9967) is exempt from payment of tax: Sr.no.21, Services provided by a goods transport agency, by way of transport in a goods carriage of - (a) agricultural produce; (b) goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed ₹ 1500/-; (Omitted vide Notification No. 04/2022 -Central Tax (Rate) dated 13-07-2022 w.e.f. 18-07-2022 ) (c) goods, where consideration charged for transportation of all such goods for a single consignee does not exceed ₹ 7,500/- (Omitted vide Notification No. 04/2022 -Central Tax (Rate) dated 13-07-2022 w.e.f. 18-07-2022 ) (d) milk, salt and food grain including flour, pulses and rice; (e) organic manure; (f) newspaper or magazines registered with the Registrar of Newspapers; (g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or (h) defence or military equipments. Similarly, the following services received by the GTA (Heading 9966 or 9973) is also exempt Sr.no.22, Services by way of giving on hire (b) to a goods transport agency, a means of transportation of goods. Thus, if the GTA hires a means of transportation of goods, no GST is payable on such transactions Place of Supply of GTA services where location of GTA recipient of GTA services is in India: Section 12(8) of IGST act prescribes place of supply of services by way of transportation of goods, including by mail or courier to, (a) a registered person, shall be the location of such person; (b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation. Provided that where the transportation of goods is to a place outside India, the place of supply shall be the place of destination of such goods . (Omitted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-10-2023 ) Reporting of GTA transaction in GSTR-3B GSTR 1 raising of self-invoice : (a) GTA services by a Unregistered GTA to Registered recipient : i. In this case registered recipient needs to raise Self Invoice on the basis of LR/Bill/any other document issued by GTA and discharge tax on reverse charge basis. ii. The details of these invoices will be reported in 3.1(d) of GSTR-3B for discharging tax on RCM Basis. iii. The GST ITC credit will be taken on the basis of self-invoices and same will be reported in table 4(3) of GSTR-3B for availing ITC. (b) GTA services by a Registered GTA to Registered recipient (RCM): i. Registered GTA: In this case Invoice will be raised by GTA and same will be shown in GSTR-1 under Table 4B if It is B2B supplies (on which recipient is liable to pay tax under RCM). In GSTR-3B it will be reported as Outward Supply under Table 3.1 (c ). ii. Registered recipient: Will be reported in 3.1(d) of GSTR-3B for discharging tax on RCM Basis. In GSTR-3B it will be reported in table 4(3) for availing ITC. (c) GTA services by a Registered GTA to Registered recipient (FCM): i. Registered GTA: In this case Invoice will be raised by GTA and same will be shown in GSTR-1 under Table 4B if It is B2B supplies. In GSTR-3B it will be reported as Outward Supply under Table 3.1 (a ). ii. Registered recipient: Will be reported in Table 4(5) of GSTR-3B for availing ITC. The details of Invoices raised by registered GTA will be auto populated in GSTR 2A of the registered recipient.