GST On Freight
Transport of goods by road or freight is the most commonly used mode of transportation for businesses which supply goods. This freight is facilitated either by a Goods Transport Agency (GTA) or common carriers such as auto rickshaw or courier agencies.
A GTA is basically any person who provides services in relation to freight or transport of goods by road and issues a consignment note, commonly called as Lorry Receipt (LR). Hence, a person who provides the service of transportation of goods by road or any related service, such as loading, unloading, packing, unpacking, etc. can be considered as a GTA if the person issues a consignment note. Issuing of a consignment note or LR to the person taking the transportation service is integral for a person to be considered as a GTA. A copy of this consignment note will be sent to the consignee which gives the consignee the right to receive the goods from the GTA. The issue of a consignment note is what differentiates a GTA from a regular transporter. A regular transporter who can issue any document for the transportation service, except the consignment note.
A consignment note issued by a GTA should contain the following details:
- Serial Number
- Names of the consignor and consignee
- Registration number of the carriage used for transport of goods
- Details of the goods transported
- Place of origin and destination
- Person liable for paying tax
2. GST on Freight
The GST rate on freight services provided by a GTA are given below:
No GST on freight charges in India is applicable for the following:
- Transport of agricultural produce
- Transport of milk, salt, food grains including 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, calamities, accidents or mishaps
- Transport of defence or military equipment
- Transport of any goods, where the gross amount charged for transportation for a consignment transported in a single carriage is less than Rs. 1,500
Rated at 5%
For transportation of goods other than the above, GST on freight charges at 5% is levied.
3. GST on Freight Charges India
GST on Freight in Invoice
GST should be charged on the total value of supply. If the freight charge is included, then GST on freight charges has to be levied at the same rate of tax charged on supply.
GST on Freight Forwarding
Freight forwarding and logistics shall be a ‘supply of services’ including the movement of goods by air, sea, inland waterways, rail or road. The GST treatment on freight transportation shall depend whether the freight transportation is domestic or international.
4. Who is liable to pay GST on Freight?
Now, the natural question which emerges is – who is liable to pay GST on GTA service: the GTA or the service recipient? For this, the first step to be taken is to identify who is the recipient of the transportation service provided by a GTA.
How to identify the recipient of freight service provided by a GTA?
In case of transportation of goods, identifying the person who receives the service from the GTA can be confusing - Is it the person sending the goods (consignor) or the person receiving the goods (consignee)?
In this case, the recipient of service will be the person who makes the payment of freight charges. Hence, if the consignor pays the freight charges to the GTA, the consignor becomes the recipient of service and if the consignee pays the freight charges to the GTA, the consignee becomes the recipient of the service.
For example, a dealer takes the services of a GTA to deliver goods to his customer. The freight for the consignment is paid by the supplier. In this case, the dealer is considered as the person who has availed the transportation service from the GTA and hence, is the recipient of the service. Similarly, another consignment which the dealer sends through the GTA is a ‘to-pay’ consignment, where the customer will pay the freight charges to the GTA. In this case, the customer becomes the recipient of service from the GTA.
Who has to bear the GST tax liability on freight Service?
Once the recipient of the service has been identified, we can answer the important question of whether the GTA or the service recipient has to pay the tax liability.
This is based on the following 2 scenarios:
- Recipient belongs to the specified category of persons, OR
- Recipient does not belong to specified category of persons
Recipient belongs to specified category of persons
When a GTA, whether registered or unregistered, provides taxable transportation or related services to any of the specified persons, the recipient of the service is liable to pay tax on reverse charge basis. These specified persons are:
- A person registered under GST
- A factory registered under or governed by the Factories Act, 1948
- A Society registered under Societies Registration Act, 1860 or under any other law for the time being in force in any part of India
- A co-operative society established by or under any law
- A body corporate established by or under any law
- A partnership firm, whether registered or not under any law, including association of persons
- A casual taxable person
Note: All the persons specified above are mandatorily required to register under GST, irrespective of their turnover, as they are liable to pay tax on reverse charge basis.
Any person in the above list of specified persons who pays tax on reverse charge basis on transportation service received from a GTA, is eligible for full input credit of the tax paid.
Recipient does not belong to specified category of persons
In the list of specified persons who are liable to pay tax on GTA service on reverse charge, certain persons have not been included. These are:
- Unregistered Sole Proprietor
- Unregistered HUF (Hindu Undivided Family)
- Unregistered BOI (Body of Individuals)
When a registered GTA provides transportation service to any of these persons, the GTA is liable to pay tax on the supply. This is applicable only when the GTA is registered. If the GTA is also unregistered, there will be no tax liability on the GTA or the recipient.
In such cases, where a registered GTA is liable to pay tax @ 5% on transportation service, 2 options have been given to the GTA:
- Pay tax @ 5% with no input tax credit
- Pay tax @ 12% with full input tax credit
A registered GTA has to make this choice at the beginning of the financial year.
5. Registration for a GTA under GST
GTA exclusively providing services to specified persons
A GTA exclusively providing transport services to the specified persons who are liable to pay tax on reverse charge, is not required to register under GST. This means that even if their turnover crosses the threshold limit, they are not required to register under GST. This is because 100% of their supplies will be reverse charge supplies, on which they will not have any tax liability.
GTA not exclusively providing services to specified persons
A GTA which is not exclusively providing transport services to the specified persons, who are liable to pay tax on reverse charge, has to register under GST when its aggregate turnover crosses the threshold limit. These are GTAs who provide services to sole proprietors, HUF (Hindu Undivided Family), etc.
Enrolment of unregistered GTAs in GST portal
All unregistered GTAs should enrol as a GTA in GST portal using Form GST ENR-01. After enrolment, a unique enrolment number will be issued to such GTAs. Using this enrolment number, unregistered GTAs can generate E-Way Bill from the GST portal.