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Is a GTO also a GTA under GST and hence liable to tax
By K Srinivasan, IRS
Oct 10, 2017

There is a doubt in many of our minds whether a Goods Transporter could also be a Goods Transport Agent required to issue a Consignment note and consequently liable to GST?

It is argued that a Goods transporter is not required to issue any receipt or note for the receipt of goods as it is not his duty.

It is said to be the duty of the agent who undertakes the responsibility to hand over the consignment to the designated person, to issue such a consignment note.

Hence, the person who merely undertakes the transportation of goods without the responsibility to hand over the goods to the designated person is not sought to be covered within the confines of tax.

In the absence of a contractual obligation for delivery of goods to the designated person, such transporters are unlikely to issue any consignment note or receipt document covering the transport of goods, besides being not liable to any tax.

In fact, goods transportation by road was in the Negative List under the earlier regime and now also it does not appear to be taxable under the present GST regime. (Sl no.18 of Notification 12/2017 Central Tax (Rate) Dt.28/6/2017 refers)

According to definition 2(ze) appended to the GST Rate Notification for Services bearing No. 11/2017 Central Tax (Rate) Dt.28/6/2017, GTA is 'any person who provides services in relation to transport of goods by road and issues consignment note, by whatever name called'.

As per the above definition, only the recipient of such service is liable to pay tax on RCM @ 5%, provided the GTA does not avail ITC.

An additional explanation is also provided under sl.No.11 of the said notification, by once again reproducing the Clause 2(ze) referred to above.

By all this, it becomes clear that GTA is the booking agent and not the transporter of goods necessarily always. If he happens to be both, himself, then that is an altogether a different question.

But the Budget speech of 2004 by the FM makes it abundantly clear that the levy was sought to be introduced on the agents and not the truck operators.

In fact, under the erstwhile regime and the new GST regime, there is a specific notification exempting the activity of hiring out transport vehicles meant for use as a means of transport of goods. Thus, GTO is outside the purview of tax at all times.

Services by way of giving on hire to a goods transport agency, a means of transportation of goods is exempt under the GST regime vide Notification no. 12/2017- Central Tax (Rate) dated 28.06.2017 ( Thus, even if the GTA hires a means of transportation of goods, no GST is payable by him on such transactions.

There are a catenae of old decisions to the effect that mere transportation without issue of consignment note, can't be classified as GTA service and so on.But, all that may not be greatly relevant at this point of time under GST.

When the Notification defines a GTA to be one who provides any service in relation to transport of goods by road and issues a consignment note by whatever name called, it is not expected to read a different meaning into it from what is expressly provided – that is, a person who issues a receipt note for transport of goods by road alone to be recognized as GTA for taxation under GST.

It is found from an Allahabad HC decision that under Carriage by Road Act, a common carrier shall issue a goods receipt note on acceptance of goods. Thus, he is said to be under that Act, a person engaged in the business of collecting, storing, forwarding for distribution of goods by a goods carriage under a GRN including a person who engages himself in the door-to-door transportation of goods.

It also follows from the above that not all the persons providing goods transportation will be covered under the ambit of tax except a common carrier who issues a goods receipt or consignment note, both of which were held to be equal business terms meant for acceptance of goods.

It is interesting to note that under the present GST regime the GTA notification No. 11/2017 Central Tax (Rate) Dt.28/6/2017 includes under its ambit of GTA, even transportation of used household articles for personal use for the purpose of GST which was earlier under forward charge in the hands of GTO. This would mean that GTO is completely out of the picture of taxation under GST.

But one significant problem here would be no unregistered individual whose used articles are transported for his personal use, will be in a position to pay for the GTA service on RCM basis@ 5% since the same was not provided for under categories (a) to (g) of Notification No. 13/2017 Central Tax (Rate) Dt.28/6/2017..

The original Notification 13/2017 dt 28/6/2017designated only certain categories of persons alone for payment of tax on RCM basis, of which unregistered person, is not one of the categories specified therein.

Therefore, it is learnt that these transactions were being handled by GTA's exclusively engaged in Packing and Moving of used household goods for personal use on Forward charge basis @18 % with full ITC from 1/7/2017 to 21/8/2017 which is the only rate category available for all services attracting tax on FCM basis.

They have reportedly switched over to 12 % with effect from 22/8/2017 in terms of a new notification 20/2017 Central Tax(Rate) Dt.22/8/2017 which amended Sl. no 11 again of the earlier Notification No.11/2017 to the above extent of permitting GTA to pay tax @ 12% on FCM basis with full ITC facility.

It would also appear from the above that a transporter of goods or truck operator although not expected to be covered under the ambit of the new tax, if he himself acts as an operator cum an undertaker of responsibility of handing over the goods to the designated person bound by a contractual obligation, then he would be construed as a GTA in the eyes of present Law and all tax obligations as applicable would apply to him accordingly.

This is a typical case of a person owning a transport vehicle and as well as undertaking the responsibility of handing over the goods transported by him to the designated person by issuing a consignment note. In this case, he will be squarely covered under the definition of GTA under GST.

In either case, after all the person responsible for payment of tax is the recipient of the GTA service on RCM basis subject to of course the GTA not availing ITC except the category of private individuals for whom transportation is undertaken by GTA's in whose case forward charge is the only option open to the GTA.

It needs careful reading of Explanation 4(iv) of Notification 20/2017 Central Tax (Rate) to understand that the GTA can still preserve his immunity and option of paying @ 5% tax in respect of supply of GTA service made to undesignated persons i.e other than specified under (a) to (g) of Notification 13/2017 read with amendment Notification 22/2017 which inserts Limited Liability Partnership (LLP in addition to the List a) to g) above.

The GTA can do so provided he follows the below two conditions prescribed under Explanation 4(iv) ibid;

(iv) Wherever a rate has been prescribed in this notification 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 sub-section (2) of section 17 of the Central Goods and Services Tax Act, 2017 and the rules made thereunder.

For ease of ready reference Sec 17(2) of CGST Act is excerpted below;

'Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies'.

It is to be cautioned here that once the GTA opts for FCM @ 12 % vide Notification No.20/2017, thereafter he can't go back to RCM option and nor can he avail the RCM facility concurrently with FCM.

However, with regard to option No.1 of not availing ITC and letting the designated category of persons pay tax on RCM @ 5%, the GTA can also at the same time pay on FCM basis 5% tax in respect of undesignated persons who will be largely unregistered persons.

In this context, it would be still open to him to have recourse to Explanation 4(iv) of Notification 20/2017 and ensure the ITC requirements as prescribed therein and subject to those conditions avail of ITC and still and pay the tax @ 5% on FCM basis in respect of supplies of GTA service made to unregistered individuals who are not covered under Notification 13/2017 provided for payment of tax under RCM by such undesignated category of persons.

However, in the 22 nd GST Council meeting held at New Delhi, on 6th, October, it is proposed to exempt the service of GTA provided to unregistered person from any tax.

This would render the discussion in the two previous paragraphs irrelevant in so far as the existing liability of forward charge of 5% in respect of supplies made by a GTAs to unregistered persons are concerned which entails a 5% tax liability on the GTA on FCM vide Notification No.20/2017 read with Notification 13/2017 supra.

But, for the exact relief proposed to GTA, one may have to wait and look up the relevant notification as and when issued on the lines of the proposals of the GSTC regarding exemption of supply of service by GTA to unregistered person totally from any GST.

It occurs to the author that more and more issues under GST are forcibly taking us back in time to the old Laws for drawing parallels as the new Law is not adequately expressive of the underlying rationale of the present tax.

It might be worthwhile, therefore, to reproduce the old Law and the principles underpinning it in the form of an Education guide and issue the same under the authority of the GST Council so as to resolve many similar issues that are sure to crop up under the new regime, keeping in mind ease of doing business.

(The author is Assistant Commissioner, GST, Chennai and the views expressed are strictly personal.)