Some Important Clarifications Regarding Transportation Charges In The GST Regime
1- It is always better in the GST regime to declare the freight charges separately in the invoice as now services received from Goods Transport Agency ( GTA ) are attributable to liability of reverse charge at the rate of 5% . On these services the GTA has no liability of payment of taxes but the recipient of such services has to pay the tax at the rate of 5% on the freight charges claimed by the GTA and the recipient of such services can claim ITC of such tax paid if such person subsequently executes taxable supplies .
2- It is quite clear that ITC can only be claimed in respect of taxable supplies or zero rated supplies . Zero rated supplies means supplies in the course of export or supplies executed to SEZ units or SEZ developers . No ITC is admissible in respect of exempted or nil rated supplies .
3- It has already been clarified that the recipient of transportation services from GTA will have to issue a payment voucher at the time of payment of freight charges to the GTA and will have to deposit the tax on such charges when such services are received . The format of payment voucher has been envisaged in Rule 52 of the CGST Rules , 2017 ( Exactly the same rule is envisaged in SGST Rules , 2017 ) .
4- It is pertinent to note that in the payment voucher described above the recipient has to declare the payable tax and not the paid tax which in itself clarifies that at the time of issue of payment voucher to be issued to GTA , the payment of requisite tax in respect of freight charges claimed by the GTA is not the pre-condition of such issuance of payment voucher . The requisite tax in this respect as declared in the payment voucher is to be paid when the services are received .
5- The services from the GTA can be taken by the supplier as well as the recipient .
- In case of the supplier taking the services from GTA for transportation of goods, the G.R. shall be issued in the name of such supplier as consignor and the recipient shall be consignee and freight charges shall be paid by such supplier to the GTA incurring the liability of reverse charge on such freight charges at the rate of 5% .
- Such supplier shall mention the aforesaid freight charges after the value of taxable goods supplied in the invoice issued and charge the requisite tax on amount which shall include the amount of the value of goods and the amount of the freight charges .
- Since this supply is the composite supply which includes the supply of taxable goods as well as transportation services ( indicated as freight charges in the invoice issued ) of which the supply of the goods is the principal supply thus the tax shall be charged at the rate which is applicable on the supply of such taxable goods .
- The supplier shall be entitled to the input tax credit both in respect of the tax paid regarding inputs pertaining to the goods supplied and the tax paid in respect of freight charges as liability under reverse charge .
- There should not be any confusion regarding the claim of ITC in respect of the tax paid on the basis of reverse charge in respect of services taken from the GTA by the aforesaid supplier because such services have been subsequently supplied to the recipient by such supplier by disclosing the freight charges in the invoice issued by him and subjecting this amount to the requisite tax payable on principal supply of goods in such invoice . Thus these input services have been subsequently supplied in the form of composite supply by such supplier and tax invoice has been issued accordingly .
- In case the services of transportation is taken by the recipient from the GTA then the G.R. shall be issued of ” Self ” in respect of the recipient and such recipient shall be liable to pay the tax in respect of such transportation charges or freight charges on the reverse charge basis . In such cases the ITC of tax paid on reverse charge basis shall be claimed by the recipient instead of the supplier of such goods .
- In the GST regime the GTA need not to get itself registered as the services supplied by it have been put in the ambit of section 9(3) i.e. the liability on such services has been envisaged on the reverse charge basis .
- The Government by issuing Notification No. 5/2017 Dated 19th June , 2017 has clarified that such persons shall fall in the category of persons exempted from obtaining registration under the Act ( i.e. CGST/SGST Act, 2017 ) who are only engaged in making supplies of taxable goods or services or both , the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under sub-section (3) of section 9 of the aforesaid Act .
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