Hiring Goods Carriage to a Goods Transport Agency (GTA) is a
Taxable Supply but Exempt from GST
Advance
Ruling No. 17/ARA/2025 | Dated: 09 May 2025
The Tamil Nadu Authority
for Advance Ruling (AAR) has clarified that leasing or hiring a goods
carriage vehicle to a Goods Transport Agency (GTA) is a taxable supply under
GST. However, the supply is exempt from payment of GST by virtue of Entry No.
22 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, attracting
a Nil rate of tax. The Authority also held that the service provider need
not itself be a GTA to claim the exemption.
Background
The applicant, M/s.
Dharmaraju Ragul, an unregistered individual from Namakkal, Tamil Nadu,
proposed to purchase a goods carriage (Reefer Vehicle) and lease it to a
Goods Transport Agency (GTA) engaged in cold-chain logistics.
Since the applicant
intended to earn lease/rental income from the vehicle, an advance ruling was
sought to determine whether such leasing would be taxable under GST and whether
any exemption would be available.
Questions
Before the Authority
The applicant sought
clarification on the following issues:
1. Whether
leasing or hiring a goods carriage to a Goods Transport Agency is a taxable
supply?
2. If
the supply is exempt or taxable at Nil rate, whether any conditions are
required to be fulfilled to claim the exemption?
3. Whether
the service provider must itself be a Goods Transport Agency to avail the
exemption?
Applicant's
Contentions
The applicant relied upon
Entry No. 22 of Notification No. 12/2017-Central Tax (Rate), which
exempts services by way of giving on hire a means of transportation of goods to
a Goods Transport Agency.
It was further argued
that:
- The notification uses the expression "giving
on hire", which includes leasing and renting.
- CBIC Circular No. 164/20/2021-GST
clarifies that the term "giving on hire" also covers rental and
lease arrangements.
- Therefore, leasing a goods carriage
to a GTA should qualify for GST exemption.
Discussion
and Findings of the Authority
Ø Leasing
of Goods Carriage is a Supply of Service: The Authority
observed that the applicant proposed to lease the vehicle for five years
without providing a driver. Accordingly, the activity was classified as leasing
or rental service without an operator under Heading 9973.
Ø Exemption
under Notification No. 12/2017: The Authority referred to
Entry No. 22 of Notification No. 12/2017-Central Tax (Rate), which
exempts: Services by way of giving on hire a means of transportation of
goods to a Goods Transport Agency. It also relied upon CBIC Circular
No. 164/20/2021-GST, which clarifies that the expression "giving on
hire" includes leasing and renting of vehicles.
Ø Conditions
for Availing Exemption: The Authority observed that the
following conditions should be satisfied:
·
The activity should be a service of
hiring, leasing or renting.
·
The recipient should be a Goods
Transport Agency.
·
The vehicle should be a means of
transportation of goods.
Since
all these conditions were fulfilled, the exemption was held to be available.
Ø Whether
Service Provider Must Be a GTA: The Authority clarified
that the notification does not require the service provider to be a Goods
Transport Agency. The only requirement is that the recipient
of the service must be a Goods Transport Agency. Therefore, even an
individual or any other person leasing a goods carriage to a GTA can claim the
benefit of the exemption.
Ruling
The Tamil Nadu Authority
for Advance Ruling held that:
- Leasing or hiring a goods carriage to
a Goods Transport Agency is a taxable supply under GST.
- However, by virtue of Entry No. 22
of Notification No. 12/2017-Central Tax (Rate), the activity is
chargeable to Nil rate of GST.
- No specific conditions are prescribed
under the notification for claiming the exemption.
- The service provider need not be a
Goods Transport Agency to avail the exemption; it is sufficient that
the recipient is a GTA.
Key
Takeaways
- Leasing or renting a goods carriage
to a GTA is a supply of service under GST.
- The transaction is taxable in
principle, but enjoys Nil-rated exemption under Entry No. 22 of
Notification No. 12/2017-Central Tax (Rate).
- The exemption applies to leasing,
renting and hiring, not merely short-term hire.
- The supplier does not need to be
registered as a Goods Transport Agency.
- The crucial requirement is that the recipient
must qualify as a Goods Transport Agency issuing consignment notes.
Conclusion
This Advance Ruling
provides significant clarity for vehicle owners and transport businesses
intending to lease goods carriage vehicles to Goods Transport Agencies. The
Tamil Nadu AAR has reaffirmed that while the activity constitutes a taxable
supply of service, it is specifically exempt under Entry No. 22 of Notification
No. 12/2017-Central Tax (Rate). The ruling also confirms that the exemption is
available even where the lessor is not a GTA, thereby providing certainty to
individuals and businesses engaged in leasing commercial goods vehicles to
transport operators.
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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