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GST on Goods Transport Agency

GST for Goods Transport Agency

Transport of goods by road is the most commonly used mode of transportation for businesses which supply goods. This transportation by road is facilitated either by a Goods Transport Agency (GTA) or common carriers such as autorickshaw or courier agencies. In this blog, we will understand what is meant by a Goods Transport Agency (GTA) and the GST rates for transportation service provided by a Goods Transport Agency. This is the first blog in the series wherein, we will understand the various tax provisions with respect to services provided by Goods Transport Agencies and the tax impact on persons taking their services.

 

GST Registration
GST registration is mandatory in India for entities having more than Rs. 20 lakhs of aggregate turnover in a year (Rs. 10 lakhs in Special Category states). However, some of the supplies provided by a goods transport agency would be liable for GST under reverse charge basis. In a reverse charge transaction, the recipient of the goods is made liable for payment of GST. Hence, while providing services, goods transport agency must be aware of the reverse charge mechanism and raise invoice accordingly.

 

What is a GTA?

As per Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017, “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.

 

What are the services provided by a GTA?

The service includes not only the actual transportation of goods, but other intermediate/ancillary service provided such as-

  • Loading/unloading
  • Packing/ unpacking
  • Trans-shipment
  • Temporary warehousing etc.
  • If these services are included and not provided as independent activities, then they are also covered under GTA.

 

What will be the rate of Tax in Case of the Goods Transport Agency (GTA Services) under GST Per se?

Looking at the entry no. 3, Services of goods transport agency (GTA) in relation to transportation of goods [other than used household goods for personal use]. The rate mentioned in the rate schedule is 5% (without ITC)

Entry no. 4 of the rate schedule prescribed says that Services of goods transport agency in relation to transportation of used household goods for personal use. The rate prescribed is 5% even in this case.

Important point to highlight here is that the transporter providing any other services like “Right to use” or “Leasing” of the vehicles, he will have to review the rates separately and not take the 5% as his rate.

This means that generally the rate is 5% for the GTA under GST. The point to be highlighted is that NO ITC is available to the transporter in this case.

 

Persons Required to Pay GST on Reverse Charge
When taking the services of a goods transport agency, the following types and class of entities would be required to pay GST on reverse charge basis.

  • Factories registered under the Factory Act.
  • Societies registered under the Society Act.
  • Any co-operative society.
  • Any person who is registered under GST.
  • Any Body Corporate (Company or LLP)
  • Any partnership, if registered or not as well as AOP.

 

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Goods and services tax

Frequently Asked Questions on GST (Goods and Service Tax)

  1.  Would head offices providing centralized HR, Finance and IT functions also need to raise invoices to its branch- Yes, if the head office and branches are distinct persons as specified in section 25(4), invoice is required to be issued and GST should also be paid.
  2. Where free replacement is provided to the customers without consideration under warranty, no GST is chargeable on such replacement. In such cases goods may be sent on delivery challan as provided in rule 55 of the CGST Rule, 2017
  3. How the invoicing should be done for free goods given along with sale so that corresponding input tax credit is not required to be reversed for products under scheme?- Invoice value would include value of all goods including those supplied free. In such cases, ITC is not required to be reversed
  4. How to send demonstration equipment and instruments to customers or branch offices with in India on returnable basis? – No sale is involved- As the goods are sent on returnable basis and no transfer of title is involved, it is not a supply of goods. If some element of service is involved, the same will be a taxable supply. The goods may be sent on delivery challan without invoice as it is not a supply of goods.
  5. How to send equipment and instruments to manufacturers’ factory for repairs and calibration with in India on returnable basis? – No sale is involved.- Challan for movement of goods without supply is to be issued in terms of Rule 55 of CGST Rules.
  6. Mistakes done in GSTR Returns can be corrected in subsequent returns to be filed through amendment Table (For example Table 11 of GSTR-1). Such mistakes can be corrected till the due date for filing of the return for the month of September subsequent to end of the year or filing of the annual return, whichever is earlier.
  7. No ITC is permitted to GTA engaged in providing GTA services which are under RCM and are treated as exempted supplies in the hand of GTA. However, if GTA is also liable to pay tax under forward charge as supplier, he is not permitted to avail ITC if he is claiming the concessional rate of 5%. If ITC is claimed, the GST rate for GTA in forward charge will be 12%.
  8. The compensation to employees in the form of money is not a supply. However, fringe benefits are supply of goods or services and are liable to tax if not exempted. These are transactions in furtherance of business and even if supplied without consideration, the same are deemed supply

 

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GST consultant in India

FAQ’s on levy of GST on supply of services to the co-operative society

  1. Services provided by the Central Government, State Government, Union territory or local authority to a person other than business entity, is exempted from GST. So, Property Tax, Water Tax, if collected by the RWA/Co-operative Society on behalf of the MCGM from individual flat owners, then GST is not leviable.
  2. Similarly, GST is not leviable on Non-Agricultural Tax, Electricity Charges etc, which are collected under other statutes from individual flat owners. However, if these charges are collected by the Society for generation of electricity by Society’s generator or to provide drinking water facility or any other service, then such charges collected by the society are liable to GST.
  3. Sinking fund, repairs & maintenance fund, car parking charges, Non- occupancy charges or simple interest for late payment, attract GST, as these charges are collected by the RWA/Co-operative Society for supply of services meant for its members.

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EXPORT WITHOUT PAYMENT OF IGST

Export Without Payment of IGST

Entities involved in export of goods or services having GST Registration are allowed to export goods without payment of IGST by furnishing an export bond or Letter of Undertaking (LUT) in Form GST RFD-11.

PROCEDURE FOR APPLICATION OF LETTER OF UNDERTAKING NUMBER:

According to the Central Goods and Services Tax Rules, 2017 any registered person exporting goods without payment of integrated tax is required to furnish a bond or a Letter of Undertaking (LUT) in FORM GST RFD-11. The following types of persons registered under GST will be allowed to submit a letter of undertaking and undertake export transactions.

  • Status holder as specified in the Foreign Trade Policy; or
  • Entities that have received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than one crore rupees, in the preceding financial year, and he has not been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or under any of the existing laws in case where the amount of tax evaded exceeds two hundred and fifty lakh rupees.

Letter of Undertaking will be valid for a period of twelve months from the date of submission. If the exporter fails to comply with the conditions of the Letter of Undertaking, the privileges could be revoked and the exporter would be required to furnish a bond.

We are noting below the list of documents that the officials are usually asking at the time of submission ofLetter of Undertaking for export without payment of IGST.

  • Letter of Undertaking (on a stamp paper of Rs 100-Signed and stamped by directors/partners/proprietor)
  • GST RFD-11 (on letter head-Signed and stamped by directors/partners/proprietor)
  • Declaration of no offences under CGST Act, 2017 or any of the existing laws(on letter head-Signed and stamped by directors/partners/proprietor)
  • Foreign Inward Remittance Certificate/ Bank Realization Certificate/ Remittance Advices and EEFC Statement for preceding Financial Year
  • Bank Certificate stating that inward remittance is more than 1 crore
  • CA Certificate confirming the figures of preceding year Export Turnover and Inward Remittance
  • Copy of PAN of company/firm (Signed and stamped by directors/partners)
  • Memorandum and Articles of Association/ Partnership Deed(Signed and stamped by directors/partners)
  • Copy of Importer Exporter Code Certificate(Signed and stamped by directors/partners/proprietor)
  • Copy of Certificate of Provisional Registration in FORM GST REG – 25(Signed and stamped by directors/partners/ proprietor)
  • ID Proofs of directors/partners/proprietor (PAN and Aadhar- Self Attested)
  • Photo ID Proof of Witnesses(Self Attested)
  • Rent Agreement and NOC from owner for using the premises. (If rented)
  • Conveyance deed-If owned (Self Attested)
  • Proof of address of the premises- Utility Bill/ House Tax Receipt(Self Attested)
  • Copy of Export Invoice(Signed and stamped by directors/partners/proprietor)
  • Affidavit regarding fulfillment of conditions of Notification No. 16/2017-CT dated 07/07/2017 (on a stamp paper of Rs 100- Signed and stamped by directors/partners/proprietor)

We can help you in getting the Letter of Undertaking Number issued at the earliest. Please contact  AJSH & Co LLP for further assistance.

 

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