Everything You Need to Know about GST on Transportation
Published By: LogiPe on September 30, 2022
In India, there are four main ways to move goods from one location to another: by rail, by air, by sea, and by road. Perishable goods are best transported by rail because it is a relatively quick mode of transportation. A waterway is a great option if you're looking for a cost-effective way to move many goods. However, this method is not as quick or adaptable as other forms of transportation,
In India, road transportation is the most common method of moving goods. According to the National Highways Authority of India, roads carry about 65% of freight and 80% of passenger traffic. A transporter or courier company handles the road transportation of goods. This article will discuss the Goods and Services Tax (GST) on transport services and the Goods Transport Agency (GTA).
What is GST on Transportation?
The Indian parliament passed the Goods and Service Act to replace many indirect taxes imposed on the nation's provision of goods and services. All goods and services supplied within India are subject to GST, or Goods and Services Tax. A singular indirect tax is collected when goods and services are sold under the GST. It contributes to removing tax spiking and will make Indian trade more competitive in both domestic and international markets.
What is a Goods Transport Agency (GTA) in GST?
A Goods Transport Agency (GTA) is defined in Notification No. 11/2017 Central Tax (Rate) recorded June 28, 2017. Per the definition, a GTA refers to any individual who offers goods transportation and related services by road and issues consignment notes, regardless of the name used. This indicates that while other parties may also lease vehicles for the transportation of goods, only those who issue consignment notes are regarded as GTAs. A consignment note is thus a requirement for something to be considered a GTA and incur GST on transportation charges.
Other related services like loading, packing, trans-shipment, and temporary warehousing are also included in the service, in addition to the actual transportation of the goods. The definition of a GTA also covers these services if they are integrated rather than offered separately.
In order to transport goods by road in a goods carriage, a goods transportation agency will issue a consignment note in response to the receipt of the goods. The service provider will not fall under the purview of the goods transport agency if they do not issue a consignment note. The issuance of a consignment note indicates that the transporter now has the lien on the goods. The goods are now the transporter's responsibility until they are delivered to the consignee safely.
GST Rates on GTA
Two tax rates apply to a Goods Transport Agency (GTA). A GTA is impacted by the availability of Input Tax Credit under GST (ITC). The goods transport agency may incur a rate of 5% or 12% GST on transportation charges, depending on the circumstances.
The basic rate of GST is 5% on transportation-related businesses, and a GTA is not permitted to claim input tax credits (ITC) on the goods and services used to provide services. The GST on transport services offered by the GTA is 12 per cent when using the Advance Charge Approach. For a GTA, additional goods are priced at 5% without ITC and 12% with ITC. If GTA charges 12% for shipping items to 7 specified recipients, it is required to submit the tax in order to claim ITC. Instead, if the GTA levies a 5% tax, the recipient is subject to the Reverse Charge Mechanism (RCM), which entails a tax deposit and bars ITC claims. Reverse Charge describes a supply of goods or services where the recipient is responsible for paying tax rather than the supplier in the case of specified categories of supply.
Exceptions In GST transportation
GST only applies to services rendered by a GTA. A person other than the GTA is not required to provide GST on transport for goods. Additionally, a GTA is not eligible to register for GST if they only produce taxable goods or services to which the Reverse Charge Mechanism (RCM) applies. Therefore, if a GTA is merely transporting goods where the collector is required to have paid the entire duty under the reverse charge basis, he is exempt from GST.
The delivery of agricultural products, milk, beans, rice, wheat, newspapers, and magazines are just a few of the GTA services that are GST-exempt. The provision of transit cargo-related services to the landlocked nations of Nepal and Bhutan has been exempted. GST is also not applied to services provided by giving a means of transporting goods on hire to a goods transport agency.
If consideration charged by GTA for a single carriage did not exceed Rs 750 – it was exempt up to 17th July 2022. [This exemption has been withdrawn w.e.f. 18th July 2022] If consideration charged by GTA for a consignment in a single carriage did not exceed Rs 1500 – it was exempt up to 17th July 2022. [This exemption has been withdrawn w.e.f. 18th July 2022]
Documents required for registration on the GST portal
To register their GTA company under the GST umbrella, a transporter who provides goods transport services must have the required documents on hand for verification purposes on the GST website:
- Aadhaar card
- PAN card
- Proof of Address
- Details of bank account
- Copy of previous electricity bill
- Deed/document of ownership (in the case of owned property) or
- Lease or rent contract (if the property is leased or rented)
- Property tax receipt
- The owner’s consent letter or a No Objection Certificate (NOC)
- Copy of the Municipal Khata
To keep things running smoothly, a transportation service provider must stay on top of their taxes. Knowing what is covered by GST and GTA can help the business operate more profitably and effectively.
At LogiPe, we understand how crucial efficient tax management is to a business's overall success. We aim to assist logistics service providers in digitizing their spending and effectively managing costs.
Learn more about how our services benefit your business byvisiting our website.