A Guide to GST for Good Transportation Agency and Truck Owners

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Guide to GST for Good Transportation Agency

Yes, the Indian trucking business is expanding, hauling around 4.6 billion tons of freight every year. This is expected to increase to 9.6 trillion tonne-kilometers by 2050. With such development, companies and truck owners must comprehend the Goods and Services Tax (GST) to guarantee seamless operations and compliance. This blog looks at how GST relates to Goods Transport Agencies (GTAs) and truck owners, including rates, programs, and exemptions.

GST for Good Transportation Agency

What is GST?

GST (Goods and Services Tax) is a comprehensive indirect tax paid on the sale of goods and services in India. While not necessary for everyone, firms must register for GST if their revenue reaches the following thresholds:

Normal States:  Rs. 40 lakh yearly
Special Category States:  Rs. 10 lakhs yearly.

What is a GTA?

The goods Transport Agency (GTA) carries items by road and provides a consignment note that serves as a receipt. GTAs link shippers to carriers and handle logistics including paperwork and insurance.

Key Services Offered by GTAs:

  • Issuing consignment notes to trace shipments
  • Packing, loading, unloading, and storage (if necessary).
  • Ensure safe and timely delivery.
  • Managing shipping papers.

What are Consignment Note Under GST?

The goods Transport Agency’s (GTA) primary obligation when receiving items for shipment is to provide a consignment note. This document is serially numbered and normally issued to the consignor (sender), consignee (receiver), and transporter for proper record-keeping purposes.

A consignment note is a critical receipt that provides facts such as:

  • Consignor and consignee participate in the transaction.
  • The kind and amount of items being carried.
  • Shipment’s origin and destination.
  • The entity liable for GST payment, whether it be the consignor, consignee, or GTA.

How are GST Rates Applicable to GTA

GST is applicable to services offered by registered Goods Transport Agencies. The responsibility for paying GST may rest with either the GTA or the service recipient, depending on the scenario.

Forward Charge Mechanism (FCM):

In this case, the GTA is responsible for paying GST on the transport services they provide. This method allows GTAs to have greater control over their tax obligations and enables them to claim Input Tax Credit (ITC) for eligible expenses, such as fuel and vehicle maintenance.

Under FCM, two options are available:

5% GST without ITC:

  • GTAs charge 5% GST to the service recipient and remit it to the government.
  • However, they cannot claim ITC on related business purchases, which may increase overall costs.

12% GST with ITC:

  • GTAs charge 12% GST and are eligible to claim ITC on eligible expenses, reducing their tax burden.
  • This option requires detailed record-keeping to support ITC claims.

GST Returns for GTA Under FCM:

GTAs are required to file the following GST returns:

  • GSTR-1 (Sales): Filed monthly or quarterly, this return details all outward supplies (transportation services).
  • GSTR-3B (Summary & Tax Liability): Filed monthly or quarterly, it summarizes tax liability based on GSTR-1 and other transactions.
  • GSTR-9 (Annual Return): Filed annually, this provides a comprehensive overview of all GST transactions for the financial year.

What is Reverse Charge Mechanism (RCM) on GTA Services

In some cases, GST on transportation services is payable by the recipient under the RCM. Recipients are required to pay a 5% GST on the service value if they fall into specific categories, such as:

  • Factories registered under the Factories Act, 1948.
  • Societies under the Societies Registration Act.
  • Co-operative societies.
  • Body corporates, including companies and PSUs.
  • Registered or unregistered partnership firms.
  • GST-registered businesses or casual taxable persons.

GST Returns for GTA Under RCM:

When the recipient pays GST under RCM, the GTA is not required to file GSTR-1 or GSTR-3B, as they are not directly handling GST payments. However, they may still need to file GSTR-9 (Annual Return) based on their yearly transactions.

Understanding GTA Exemption under GST

Exemption On Specific Goods:

  • Agricultural product (to encourage agricultural activities)
  • Milk, salt, and cereal grains are considered vital goods.
  • Organic manure (to encourage sustainable operations).
  • Defense or military equipment (national security)
  • Newspapers and magazines (to maintain free flow of information)
  • Relief materials (for disaster relief activities)

Exemption on Transaction Value:

Low-value goods: When the total cost of conveying a single cargo within a single carriage does not exceed Rs.1,500, the service is excluded from GST.

Consolidated Consignments: If the entire amount charged for shipping all items to a single consignee (receiver) is less than Rs. 750, the shipment is free from GST.

How GST for Truck Owners/Small fleet owners in India

In India, the Goods and Services Tax (GST) applies to almost all purchases, including vehicles. When you purchase a new truck, a 28% GST is applied to the price. However, the good news is that this GST amount may be claimed as Input Tax Credit (ITC).

As a truck owner or small fleet operator, you may belong to one of the following categories:

When you are a Truck Owners

Registered Business (FCM):

  • If you are GST-registered, you fall under the Forward Charge Mechanism (FCM).
  • You are responsible for collecting GST on your services and depositing it with the government.
  • The applicable GST rate is 12%, and you can claim ITC on eligible expenses.
  • Unregistered Business (RCM):

If you are not registered under GST, the Reverse Charge Mechanism (RCM) may apply in certain cases.

  • This happens when you provide services to a GST-registered company.
  • In such cases, the shipper pays 5% GST on taxable goods.

When you Rent a Truck to a Goods Transport Agency (GTA)

Renting a truck to a GTA is exempt from GST. This exemption applies even if you are a GST-registered business. In this scenario, the truck owner or fleet operator is not required to collect or pay any GST on the rental income.

Thankyou For Reading: A Guide to GST for Good Transportation Agency and Truck Owners

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