GST on Hire charges On Lorry, Goods and Services Tax - GST

[Reeba Raju]

I am a GST registered contractor who undertakes civil contract works. I also own a lorry which is used for transportation of goods by road and hire charges is collected by me directly. Is the service provided by me by way of transportation of goods by road is taxable or exempted as covered by Notification No. 12/2017 under heading 9965

Posts / Replies

[KASTURI SETHI]

A lorry is a special purpose motor vehicle. Who is the service receiver ? Write name of the department to whom service is being provided. Your service does not fall under HSN 9965.

[Reeba Raju]

Service is provided to General public (B2C). Im the owner of the lorry and hire charges are collected directly by me only.

[KASTURI SETHI]

This service is not exempted. It is taxable. Only threshold exemption is available. It is covered under "Renting or leasing of goods". In Service Tax era, such service was known as "Right to Use of Tangible Goods".

[Shilpi Jain]

If its a hire transaction i.e. payment made based on time period and not generally dependent on distance, would be liable @18% under HSN 9966.

However, if it is a transaction of transport of goods i.e. consideration dependent on the distance, it would be exempt as it would be transportation of goods other than by GTA.

[Ganeshan Kalyani]

There is no difference on GTA and GTO in my view. The transport agency owns the responsibility of the goods that he is carrying on his vehicle. Also, the operator might be asked by his client / customer if anything happens to the goods carried by the operator. Then where is the difference between both agency and operator. Operator may also be given some paper as an acceptance of lien on goods during transit. So, the changes of claiming exemption stating as operator is questionable by department.

[KASTURI SETHI]

It is pertinent to go through the following case law (pertaining to pre-GST era). still it is relevant in this context.

2018 (13) G.S.T.L. 170 (Tri. - Mumbai) = 2018 (4) TMI 912 - CESTAT MUMBAI DINSHAWS DAIRY FOODS LTD. Versus COMMISSIONER OF C. EX., NAGPUR

[KASTURI SETHI]

With due regard to Sh.Ganeshan Kalyani Ji, I am of the view that in the absence of consignment note, GTO and truck owner both are out of the definition of GTA in terms of Notification No.12/17-CT(Rate) dated 28.6.17 (as amended) Para No.2 (ze) of Notification refers. Hence both GTO(Goods Transport Operator) and truck owner exempted from GST.

Further it is pertinent to mention that liability of Service Tax on Goods Transport Services by road was shifted from truck owner or truck operator to GTA in the Budget for the year 2004-05.The then Finance Minister in his Budget Speech said, " I may clarify that there is no intention to levy Service Tax truck owners or truck operators".

Moreover, the same definition of GTA has been carried forward to GST from Service Tax.

See clause (50b) of Section 65 of erstwhile Finance Act and under above mentioned Notification in GST.

[KASTURI SETHI]

DIFFERENCE BETWEEN GTO AND GTA

GTO is NOT GTA. So vehicles hired to GTO are not eligible for exemption under Notification No.12/17-CT(R) dated 28.6.17 as amended (serial no.22). Taxable under Notification No.11/17-CT(R) dated 28.6.17 (serial no.10) Decision of AAAR is as under:-

IN RE : LIBERTY TRANSLINES = 2020 (9) TMI 1104 - APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA

[YAGAY andSUN]

GST ON GTA CAN’T BE AVOIDED BY NON-ISSUANCE OF CONSIGNMENT NOTE.

Goods Transport Agency (GTA)

“Goods transport agency” or GTA means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.
This means, while others might also hire out vehicles for goods transportation, only those issuing a consignment note are considered as a GTA. Thus, a consignment note is an essential condition to be considered as a GTA.

Consignment Note

A consignment note is a document issued by a goods transportation agency against the receipt of goods for the purpose of transporting the goods by road in a goods carriage. Below is the sample of consignment note: -

GST Applicability on Transport of Goods

Services by way of transportation of goods are exempted:

(a) by road except the services of:

(i) a goods transportation agency.

(ii) a courier agency

(b) by inland waterways.

There are two types of services involved in transportation of goods: -

1. By way of activity described as goods transport agency’ services

2. By way of rental services of transport vehicles can be provided

If the lien of the goods is transferred and the transporter becomes responsible for the goods till its’ safe delivery to the consignee, the services will be classifiable as goods transport agency services.

However, if the vehicles are provided to the client on rental for use as per their requirement, the services will be classifiable as ‘rental services of transport vehicles’.

In case of services classified as Goods Transport agency services, it will be liable under GST for payment of GST on the taxable value of services. Issuance of consignment note, or its non-issuance does not make any difference so far as the nature of the activity is carried out by them is concerned. Mere non-issuance of the consignment note in such cases does not make them entitled for exemption from payment of GST.

Case Law: K M Trans Logistics Private Limited 2020 (4) TMI 668 - APPELLATE AUTHORITY FOR ADVANCE RULING RAJASTHAN

In the given case law appellant was providing services to various manufacturers of motor vehicles in transporting the vehicles from their factories to their authorised dealers in various cities in India. Appellant was carrying e-way bill during the transportation service as notified in Notification, No. 12/2018-Central Tax, dated 07.03.2018.

Appeal by the client:

K M Trans Logistics Private Limited was appealing their services of transporting vehicles as non-taxable supply of services under GST as they were not carrying any consignment note and these services cannot be classified as Goods Transport Agency Services.

The appellant has further contended that nowhere in the E-Way Bill format it is required to mention the Consignment Note No./LR/GR issued by Goods Transport Agency or transporter and E-Way Bill can be generated without generating

Consignment note/LR/GR and since there is no consignment note issued, thus, the services are out of the purview of GST and will categorize as non-taxable service.

Grounds of Appeal:

The appellant has mentioned the following grounds of Appeal:

1. Appellant was placing reliance upon the Notification No. 12/2018-Central Tax, dated 07/03/2018. Through this Notification, the format of E-Way Bill was reproduced along with notes appended to the format of E-way Bill in the impugned order of the Rajasthan Authority for Advance Ruling which is not correct. Note No. 2 of E-Way Bill had wrongly been quoted leading to misinterpretation of the requirement of details at column referring “Transport Document Number”.

2. The Transport Document No. as required at point B.2 of Part B of the E-Way Bill is described at Note 3 of the notes appended to the format says: “Transport Document number indicates Goods Receipt Number or Railway Receipt Number or Forwarding Note number or Parcel way bill number issued by railways or Airway Bill Number or Bill of Lading Number”.

3. Nowhere in the E-Way Bill format is a requirement of mentioning the Consignment Note No./LR/GR issued by Goods Transport Agency or transporter. Thus, there is no requirement of mandatory issuing consignment note or LR/GR by the transporter.

4. E-Way Bill can be generated without generating Consignment note/LR/GR. Presently the E-Wav Bills are generated on the GST portal without mentioning of Consignment note /LR/GR.

5. Since there is no consignment note issued, thus, the services are out of the purview of GST and will categorize as non-taxable service/ non-GST supply.

Facts of the case:

We find that the format of e-way bill, in whatever manner designed or amended, is not relevant for deciding the classification of the activity carried out by them. The nature of activity carried out by them is independent of the format of e-way bill rather e-way bill format has no connection whatsoever, with the nature of activities undertaken. In any case, mere non-requirement of mentioning of any detail in E-way Bill does not affect liability of payment of GST on any service unless the service has been exempted through an exemption Notification issued by the Government. Hence, we find that the contentions of the appellant concerning format of e-way bill are not relevant to the instant issue.

Order of the appeal

The appeal was rejected by the department and it was held that the services to be provided by the appellant are leviable to GST, as specified under Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 (as amended) read with exemption Notifications, if applicable, as per the exact nature of services to be provided by them.