Meaning of Goods Transport Agency [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. Thus, the business firms which are engaged in the transportation of goods by road and issue consignment note / LR, etc. shall be called Goods Transport Agency (GTA) for the above notification.
Any entity though engaged in the transportation of goods but does not issue consignment note/ LR shall be out of the purview of Goods Transport Agency (GTA). It may be noted that road transportation services provided by a person other than the Goods Transport Agency (GTA) are in any manner exempt from the payment of tax.
Mechanism and the Rates of Tax
Let us recall the prime reason which delayed the levy of service tax on Goods Transport by road until 2004. As said above, it was the burden of compliance which deterred the road transporters to accept such levy. In that perspective, the liability to pay service tax was shifted away from the transporter and imposed on the consignor or consignee whosoever was liable to pay freight to the transporter. The said reverse charge mechanism continued for years together, grandfathered, and we entered the GST regime on 1.7.2017 with almost the same philosophy.
A little later, the Government diluted the original scheme and provided an option to the transporters to pay GST/ tax under the forwarding charge mechanism.
Let us now understand the scheme of taxation for GTA under the GST regime;
OPTION 1 – Payment of tax under forwarding Charge [by GTA]:
- An option available to the Goods Transport Agency (GTA) is to pay tax @ 12% (IGST or CGST+SGST) under forwarding charge.
- In case, the Goods Transport Agency (GTA) opts for tax payment under forwarding charge, it will issue a tax invoice with the charge of tax @ 12% and make payment to the Government on its own account.
- The recipient shall be eligible to avail credit of tax paid by Goods Transport Agency (GTA).
- GTA entitled to Input Tax Credit – The incentive given to GTA under this option is that it shall be eligible to avail Input Tax Credit on input services and goods used for providing such service. Repair and maintenance of motor vehicles, motor insurance, renting of office space, manpower, etc. are the key services where GTA can avail Input Tax Credit. Similarly, tax paid on the purchase of motor vehicles and spares is also eligible for an Input tax credit.
- It may be relevant to note that since petroleum continues to be outside the GST net, tax paid on the purchase of fuel by the transporters shall not be eligible for an input tax credit.
- Needless to mention that Goods Transport Agency (GTA) shall also be required to obtain registration under GST and obtain GSTIN in case it chose to pay tax under forwarding charge.
OPTION 2 – Payment of tax under reverse charge [by the recipient]:
- Where GTA does not opt for payment of tax under forwarding charge and the service recipient is either of the following categories of persons;
- Any factory registered under or governed by the Factories Act, 1948
- 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
- Any co-operative society established by or under any law; or
- Any person registered under any GST legislation
- Anybody corporate established, by or under any law; or
- Any partnership firm
- Any casual taxable person.
the tax shall be paid under reverse charge mechanism by the consignor or consignee whoever is liable to pay freight to GTA.
- The tax rate under this option is 5%.
- GTA shall not be eligible to avail Input Tax Credit on input services or goods used in providing such service.
- The recipient shall, however, be eligible to avail credit of tax paid under reverse charge provided it is otherwise entitled thereto under Section 16 and Section 17 of the CGST Act.
Reverse charge mechanism (RCM) shall not apply to services provided by a GTA, by way of transport of goods in a goods carriage by road to-
- Department/establishment of Government/ Union territory; or
- local authority; or
- Governmental agencies
which has taken registration under the CGST Act only to deduct tax under section 51 and not for making a taxable supply of goods or services.