GST Knowledge Series: Questions and Answers On GST For Transportation Of Goods By Road [Part 2]

The service of transportation of goods by Road is one major expense incurred by any manufacturer/trader for their inward/outward supply of goods. Such transactions are always subject to scrutiny by GST department due to the lack of compliance owing to divergent practices. To bring clarity, the following important issues are addressed in Part-2 of the Series

7. What is rate of tax on transportation of household items?

Answer: If the transportation services of household items are provided to an unregistered person, the service is exempt from GST.

8. Whether there is mandatory reverse charge on GTA services?

Answer: There is no blanket mandatory reverse charge on GTA services under GST. The liability to pay GST under the Reverse Charge Mechanism (RCM) arises only in specific circumstances. First, the service provider must be a Goods Transport Agency (GTA). Second, the GTA must not have opted to pay GST under the forward charge mechanism. Third, the recipient of the service must fall within certain specified categories vide Sl.No. 1 of Notification No. 13/2017-CT(rate) dated 28.06.2017, namely :

(a) Any factory registered under or governed by the Factories Act, 1948 (63 of 1948); or

(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or

(c) any co-operative society established by or under any law; or

(d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or

(e) any body corporate established, by or under any law; or

(f) any partnership firm whether registered or not under any law including association of persons; or

(g) any casual taxable person;

located in the taxable territory.

In these cases, the recipient is required to pay GST at 5% under RCM. If the GTA has opted for forward charge, or if the recipient does not belong to the specified categories, then RCM does not apply. Thus, reverse charge is conditional and not mandatory across all GTA services.

9. Whether input tax credit is available to the recipient of service when GST on GTA service is paid by such recipient under RCM?

Answer: Input tax credit is available to the recipient of GTA service when GST is paid under reverse charge, provided the service is used in the course or furtherance of business and other conditions of Section 16 are satisfied.

10. Can the GTA opt for Forward charge for one consignment and Reverse charge for another?

Answer: No, a Goods Transport Agency (GTA) cannot selectively apply Forward Charge for one consignment and Reverse Charge for another. The option to pay GST under Forward Charge or Reverse Charge is not consignment-specific.

Under GST law, a GTA has to exercise the option at the beginning of the financial year either to pay GST under Forward Charge (at 5% without ITC or 18% with input tax credit) or the recipient pays 5% GST without ITC under Reverse Charge. Once the choice is made, it applies uniformly to all consignments handled by that GTA for the entire financial year. The law does not permit a GTA to switch between Forward Charge and Reverse Charge on a consignment-to-consignment basis or opt out before the end of the financial year.

11. Are incidental and ancillary services, such as, loading/unloading, packing/unpacking, transhipment and temporary warehousing, provided in relation to transportation of goods by road to be treated as part of the GTA service, being a composite supply, or these services are to be treated as separate supplies?

Answer: CBIC vide Circular 234/28/2024 dated 11.10.2024 has clarified that ancillary or incidental services provided by GTA in the course of transportation of goods by road, such as loading/unloading, packing/unpacking, transshipment, temporary warehousing etc. will be treated as composite supply of transport of goods. The method of invoicing used by GTAs will not generally alter the nature of the composite supply of service. However, if such services are not provided in the course of transportation of goods and are invoiced separately, then these services will not be treated as composite supply of transport of goods.

12. If a company has multiple GST Registrations under a single PAN or separate state registrations or separate GST registrations for distinct verticals, can some units be under RCM and some under FCM?

Answer: Where a company has multiple GST registrations under a single PAN for example, separate state registrations or distinct verticals each registration is treated as a separate taxable person under GST, and therefore one registration may opt for forward charge while another may remain under reverse charge, allowing flexibility across registrations but not within the same registration.

Read The PART-1 of The Series Here 

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Disclaimer: The content presented in this GST Q&A Series is intended solely for academic discussion and general informational purposes. It should not be construed as legal, tax, or professional advice. The views expressed are general in nature and may not apply to specific factual situations. Readers and viewers are strongly advised to seek independent professional advice before taking any action based on the information provided. The platform and contributors disclaim any liability arising from reliance on this content.

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