GST Classification of Broker Services for Arranging Trucks for
GTA (AAR No. 08/AP/GST/2021 dated 18.01.2021)
Introduction
The Goods and Services
Tax (GST) regime brought clarity and uniformity in the taxation of services
relating to transportation. However, practical complexities often arise when
intermediaries operate between truck owners and Goods Transport Agencies (GTA).
To address such doubts, an Advance Ruling was sought by M/s. Deeraj Goyal,
an unregistered individual, regarding the GST classification and taxability of
his services as a broker arranging trucks for GTAs. The Andhra Pradesh
Authority for Advance Ruling (AAR) delivered its decision through AAR No.
08/AP/GST/2021 dated 18.01.2021.
This article presents a detailed, easy-to-understand analysis of the ruling.
Background
of the Case
The applicant, M/s.
Deeraj Goyal, acts as an intermediary between truck owners and Goods Transport
Agencies (GTA). His role is limited to identifying and arranging suitable
trucks for a GTA whenever the GTA receives a transport contract from companies.
In this system:
- The GTA issues the transport tender
and coordinates with the companies.
- The applicant arranges trucks owned
by different individual truck owners.
- The applicant receives a commission,
usually deducted from the amount paid to the truck owners.
- In some cases, the GTA pays the truck
owner directly, and then the truck owner pays the commission to the
applicant separately.
The applicant does not
own trucks, does not issue a consignment note, and does not transport goods
himself. He only facilitates the connection between two parties.
Question
Raised Before the AAR
The applicant sought
clarity on the following issue:
Whether his activity of
arranging trucks for GTA should be classified as:
1. Transportation
of goods by road (which is exempt),
2. Commission
agent services, or
3. Goods
Transport Agency services;
and what would be the correct HSN classification and turnover for
GST purposes.
Applicant’s
Interpretation
The applicant argued
that:
- He cannot be a GTA because he neither
owns vehicles nor issues consignment notes.
- He cannot be considered as providing
the exempt service of transportation of goods by road since he does not
conduct transportation on his own account.
- He believed he should be classified
as a commission agent, because the amount he retains is only a
commission received from truck owners and not payment for transportation.
Thus, the applicant
requested clarification about the correct tax classification.
Analysis by
the Authority
1. Nature of Service
Provided
The AAR observed that:
- The applicant does not transport
goods.
- He only arranges trucks for GTAs.
- His income is in the form of
brokerage or commission.
- He facilitates the supply of
transport services between truck owners and GTAs.
Therefore, the
applicant’s service is not the transportation of goods but a service of
arranging and facilitating transportation.
2. Whether He Is an
Intermediary
The AAR referred to Section
2(13) of the IGST Act, which defines an intermediary as:
“A broker, an agent or
any other person… who arranges or facilitates the supply of goods or services…
between two or more persons.”
Since the applicant
arranges trucks (service) between truck owners and GTAs, he fits squarely
within the definition of an intermediary.
3. Whether He Is an Agent
The definition of
"Agent" under Section 2(5) of CGST Act includes brokers, commission
agents, and other mercantile agents who handle business on behalf of others.
Because the applicant works on behalf of truck owners and receives a
commission, he qualifies as an agent under GST law.
4. Whether Exempt Under
Transportation of Goods by Road
The exemption applies
only when a person directly transports goods by road (other than GTA).
The applicant does not transport goods himself; therefore, the exemption does
not apply.
5. Whether He Is a Goods
Transport Agency
A person becomes a GTA
only if he:
- Provides transport services, and
- Issues a consignment note.
The applicant does
neither; hence, he is not a GTA.
Classification
& Tax Rate
The AAR concluded that
the service provided by the applicant falls under:
HSN 9967 — Supporting
Services in Transport
Specifically, Heading
9967(ii) under the category “supporting services in transport other than
services of Goods Transport Agency”.
Under Notification No.
11/2017 – Central Tax (Rate) dated 28.06.2017, this service attracts:
GST @ 18% (9% CGST + 9%
SGST)
Turnover
Clarification
The AAR clarified that
the commission amount received by the applicant shall constitute his turnover
under GST. It does not include the entire freight amount paid to truck
owners; only the brokerage/commission income is his taxable turnover.
Final
Ruling
The Authority ruled as
follows:
- The applicant shall be classified
as an “Agent” providing supporting services for transportation of
goods.
- The appropriate classification is HSN
9967(ii).
- The service is taxable at 18% GST.
- The commission earned by the
applicant will form his turnover for GST purposes.
- The applicant is not a GTA and
cannot claim exemption available to road transportation service
providers.
Conclusion
The AAR ruling brings
significant clarity to intermediaries engaged in arranging trucks for GTAs. The
applicant is not considered a GTA nor a transporter. Instead, he is treated as
a broker/agent providing supporting transport services, which are
taxable at 18% GST.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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