GST on Goods Transport Agency: Rules, Compliance, & Exemptions

Road transport plays a crucial role in India’s logistics, as it moves over 60% of goods across the country. Goods Transport Agencies (GTAs) play a key role in this sector as they offer services like loading, unloading, and timely delivery. Under GST, GTAs are required to comply with specific tax rates and regulations. They have a significant role in the economy and ensure that goods reach their destination efficiently and on time. In this article, we will learn in detail about GST rates on the Goods Transport agency, its exemptions, compliance and more.

Understanding Goods Transport Agency

As per Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017, a Goods Transport Agency (GTA) refers to any person who provides services related to the transport of goods via road and issues a consignment note.

This notification clarifies that while several businesses may rent vehicles for transporting goods, only those who issue a consignment note are officially considered as GTAs under the GST law. Therefore, the issuance of a consignment note is a crucial condition for being classified as a GTA.

Understanding Consignment Note

The Goods Transport Agency(GTA) issues a consignment note once it receives goods for transportation via road. It serves as proof that the transporter has taken responsibility for the goods until they reach the destination. If this document is not issued, the transporter cannot be classified as a GTA under GST regulations. It is serially numbered for proper tracking. This document also determines who is liable to pay GST, whether it is the consignor, consignee, or the GTA, based on the applicable rules. The details of the consignment note are listed below:

• Name of the consignor(sender).
• Name of the consignee(receiver).
• Registration Number of the vehicle.
• Description of the goods.

Place of origin and destination.

GST rates of GTA

As per the GST rules, a GTA transports different types of goods, and they attract various GST rates. Below are the details:

1. 0% GST:

• Agricultural produce, milk, salt, food grains (including flour, pulses, and rice), organic manure, newspapers, relief materials for disaster victims, defence or military equipment.
• Transportation where the total charge for goods transported in a single carriage is less than Rs 1,500.
• Transportation where the total charge for goods transported for a single consignee does not exceed Rs 750.
• Used household goods for personal use.
• Transport of goods for unregistered persons (currently taxable, but the list is yet to be notified).
• If a vehicle is hired out to a GTA.

2. 5% GST:

• For most other goods, the GTA opts for a reverse charge mechanism (RCM). This means the recipient is liable to pay the tax, and the GTA cannot avail of the Input Tax Credit (ITC).

3. 12% GST:

• For certain goods, when ITC is available, but only when the GTA opts to pay GST under forward charge (i.e., the GTA pays the tax instead of the recipient). The recipient can then claim ITC.
• Transporting goods for 7 specified recipients. If the GTA does not submit a declaration for forward charge, the recipient must pay tax under reverse charge.

Does a GTA Need to Register Under GST?

 As per Notification No. 5/2017-Central Tax dated 19th June 2017, a Goods Transport Agency (GTA) does not need GST registration if it provides only those services where the recipient pays GST under the Reverse Charge Mechanism (RCM).

This rule applies even if the GTA’s income goes beyond the basic exemption limit under GST. However, if a GTA starts offering any service on which it pays tax itself, then GST registration becomes necessary. You can confirm a GTA's registration status using the official GSTIN search tool on the GST portal.

What is the Reverse Charge Mechanism?

In the context of GST, the Reverse Charge Mechanism (RCM) shifts the responsibility of tax payment from the supplier to the recipient. For GTA services, this means that instead of the transporter (GTA) paying the GST, the recipient of the transportation service is liable to pay the tax directly to the government.

Who must pay GST under reverse charge for GTA service?

Under GST rules, certain businesses must pay tax on GTA services under the Reverse Charge Mechanism (RCM). This means the recipient of the service, not the GTA, pays the GST.

These are the entities required to pay GST under reverse charge:

• Factories registered under the Factories Act, 1948
• Societies registered under the Societies Registration Act, 1860 or any other law
• Co-operative societies formed under any law
• GST-registered persons
• Companies or corporations formed under any law
• Partnership firms, whether registered or not (including Associations of Persons – AOP)
• Casual taxable persons

Only these specified recipients are liable to pay GST when they receive services from a GTA.

Who needs to pay GST under RCM?

Under GST, the person who pays or is liable to pay the freight for transporting goods by road is treated as the recipient of the service, provided they are located in a taxable territory.

If the sender (consignor) pays the freight:

Then the consignor becomes the recipient of the service. If the consignor is a factory, GST-registered person, society, or similar entity, they must pay GST under reverse charge.

If the receiver (consignee) pays the freight:

Then the consignee is treated as the recipient. If the consignee belongs to the notified category (factory, registered person, etc.), they must pay GST under reverse charge.

GST Registration Compliance for GTAs

Goods Transport Agencies (GTAs) in India must adhere to specific Goods and Services Tax (GST) registration requirements to ensure compliance with tax regulations and avoid penalties. GTAS need to understand these requirements to operate within the legal framework.

1. GST Registration Threshold

GTAs are required to register under GST if their aggregate turnover exceeds Rs 20 lakhs in a financial year (Rs 10 lakhs for special category states). However, if a GTA exclusively provides services under the Reverse Charge Mechanism (RCM), they are exempt from GST registration, regardless of turnover.

2. Reverse Charge Mechanism (RCM)

Under RCM, the recipient of the GTA services is liable to pay GST instead of the GTA. Entities such as factories, societies, co-operative societies, GST-registered persons, body corporates, partnership firms, and casual taxable persons are required to pay GST under RCM when they avail GTA services.

3. Forward Charge Mechanism (FCM)

If a GTA opts to pay GST under FCM, they are responsible for collecting and remitting GST. GTAs can charge GST at 5% without Input Tax Credit (ITC) or 12% with ITC. To opt for FCM, GTAs must file an annual declaration (Annexure V) by 15th March of the preceding financial year.

4. Voluntary Registration

GTAs can voluntarily register under GST, even if their turnover is below the prescribed threshold. Voluntary registration allows GTAs to claim Input Tax Credit (ITC) on inputs and services used in their business operations.

5. Inter-State Supply

GTAs that provide interstate transportation services must obtain GST registration, irrespective of their turnover. This ensures that the appropriate Integrated Goods and Services Tax (IGST) is levied on inter-state supplies.

6. E-Commerce Operators

If a GTA supplies services through an e-commerce operator, GST registration is mandatory, regardless of turnover. E-commerce operators are required to collect tax at source on behalf of the GTA.

7. Input Service Distributor (ISD)

GTAs with multiple branches or units may need to register as an Input Service Distributor to distribute Input Tax Credit (ITC) across locations. ISD registration is applicable if the GTA has multiple business locations and wants to centralise ITC distribution.

8. Tax Deduction at Source (TDS)

GTAs that provide services to government departments or notified entities may be subject to TDS under Section 51 of the CGST Act. Specified entities are required to deduct tax at source while they make payments to GTAs.

9. State-Specific Requirements

In certain states, such as special category states or union territories, the GST registration threshold may differ. GTAs that operates in these states must comply with the specific registration requirements applicable to each state.

Invoicing Requirements for GTAs

?Under the Goods and Services Tax (GST) regime in India, Goods Transport Agencies (GTAs) are required to issue GST-compliant invoices for their services. These details ensure transparency and compliance with GST regulations, and facilitate smooth transactions and proper tax reporting. As per Rule 46 of the Central Goods and Services Tax (CGST) Rules, a standard tax invoice should include the following details:

1. Supplier Details

Name, Address, and GSTIN: The full name, address, and GST Identification Number (GSTIN) of the GTA must be mentioned.

2. Invoice Particulars

Unique Invoice Number and Date: Each invoice should have a unique serial number and the date of issue.

3. Recipient Details

Name, Address, and GSTIN: The name, address, and GSTIN (if registered) of the consignor and consignee should be specified.

4. Service Description

Details of Goods Transported: A description of the goods being transported, including the gross weight of the consignment.

5. Tax Details

Applicable GST Rate and Amount: The applicable Goods and Services Tax (GST) rate and the amount of tax charged, including the breakup of Central Tax (CGST), State Tax (SGST), Integrated Tax (IGST), Union Territory Tax (UTGST), and cess, if any.

6. Payment Details

Person Liable to Pay Tax: Indicate whether the consignor, consignee, or the GTA is liable to pay the tax.

7. Additional Information

Place of Origin and Destination: Details of the place where the goods are handed over to the transporter and the destination.

Registration Number of Goods Carriage: The registration number of the vehicle in which the goods are being transported.

Signature of the Supplier: The signature of the GTA or an authorised representative.

Determine the place of supply for GTAs

The place of supply under GST helps decide whether CGST + SGST (for intra-state transactions) or IGST (for inter-state transactions) applies. For Goods Transport Agencies (GTAs), the rule for determining the place of supply depends on whether the recipient of the service is registered under GST or not.

1. When the Recipient is a Registered Person

If the service is provided to someone who is registered under GST, the place of supply is the location of that registered person.

• Example:

A transporter moves goods for a GST-registered business in Delhi, even if the goods are picked up from Haryana. Since the recipient is registered in Delhi, Delhi is the place of supply. If the transporter is also in Delhi, CGST and SGST apply. If the transporter is in another state, IGST applies.

2. When the Recipient is Not Registered

If the service is provided to a person who is not registered under GST, the place of supply is the location where the goods are handed over to the transporter.

• Example:

If an unregistered customer hands over goods in Mumbai to a GTA, the place of supply is Mumbai. If the transporter is also in Maharashtra, CGST and SGST apply. If the transporter is in another state, IGST applies.

Exemptions of GST under RCM:

RCM does not apply to Goods Transport Agencies in the following scenarios:

• When the recipient is a government department, local authority, or governmental agency that is registered only to deduct TDS under Section 51 of the CGST Act and not for making taxable supplies.
• If the GTA opts to pay GST under the forward charge mechanism at 12% with Input Tax Credit (ITC), the liability to pay tax rests with the GTA, not the recipient.
• Services provided by a GTA to unregistered individuals or entities not specified in the categories above are generally exempt from GST under RCM.

GST Exemption for Good Transport Agencies (GTAs)

Under the Goods and Services Tax (GST) framework in India, certain services provided by Goods Transport Agencies (GTAs) are exempt from GST, as per Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017. Listed below are the types of GTAs that are exempt from GST:

• Transport of Agricultural produce.
• Transport of milk, salt and food grains (such as rice, flour, pulses).
• Transport of Organic Manure.
• Transport of newspapers or magazines registered with the Registrar of Newspapers.
• Transport of relief materials for victims of natural or man-made disasters.
• Transport of defence or military equipment.
• Hiring out vehicles to the GTA.

Penalties for Non-Compliance with GST Rules for Goods Transport Agencies (GTA)

Goods Transport Agencies (GTAs) must follow specific GST rules to avoid penalties. If a GTA fails to comply with these rules, it can lead to financial loss and legal issues. Listed below are the penalties GTAs may face under the GST law:

• Late Filing of GST Returns

If a GTA delays filing GST return like GSTR-1 or GSTR-3B, a late fee of Rs 200 per day applies—Rs 100 under CGST and Rs 100 under SGST. The total fine can go up to Rs 5,000. Timely filing is important to avoid these charges.

• Wrong HSN Code Reporting

HSN (Harmonised System of Nomenclature) codes are mandatory in invoices and GSTR-1. If a GTA reports the wrong HSN code, it may face a penalty of up to Rs 10,000 or the amount of tax evaded—whichever is higher. This mistake can also delay refunds or lead to notices from the department.

• Non-Payment of Reverse Charge Mechanism (RCM) Liability

If a GTA or the recipient of the service fails to pay tax under the Reverse Charge Mechanism, they must pay the pending tax with interest. Besides this, penalties and late fees may also apply, as per the GST law.

Conclusion

To sum up, Goods Transport Agencies (GTAs) form the backbone of logistics in India. The GST on Goods Transport Agency services sets clear guidelines for tax rates, exemptions, invoicing, and registration. When a GTA adheres to these norms, they not only ensure lawful operation but also help to avoid financial penalties.

However, the whole process can be complex and confusing. In that case, you will require professional guidance on GST registration, return filing, or compliance for your transport business from a trusted and reliable platform. Among other service providers, Online Legal India is one of the most trusted and reliable platforms. Their expert team ensures hassle-free support for all matters related to GST on Goods Transport Agency.