GST on Broker Services for Arranging Trucks for Goods Transport
Agency (GTA)
Introduction: Goods
Transport Agencies (GTAs) play an important role in the movement of goods
across India. They connect manufacturers, traders, and businesses with trucks
that carry goods from one place to another. However, many GTAs do not own all
the trucks they use. They rely on truck owners and often require the help of truck
brokers or truck arrangers who act as middlemen between the GTA and the
truck owner. These brokers arrange trucks whenever the GTA needs transportation
support and earn a commission for this service. This creates an important
question under GST: Is the service of arranging trucks taxable? To
understand this issue clearly, we must examine the GST rules, official FAQs,
and the relevant Advance Ruling.
Whether Broker
Services are Exempt like Road Transport? There is a common
misunderstanding that truck brokerage is exempt because:
- “Transportation of goods by road
(other than by GTA) is exempt”
— Notification No. 12/2017-CT (Rate)
But brokers do not
provide transportation by road. They only facilitate the supply of
trucks.
Truck brokers are common
in the transport market, and their income comes mainly from commissions. They
do not own trucks and do not transport goods themselves. They simply find a
suitable truck owner for a GTA and coordinate the loading. Even though the transportation
of goods by road (other than by a GTA) is exempt from GST, this exemption does
not automatically apply to the broker. The broker is not providing
transportation by road. Instead, he is providing a supporting service or
intermediary service, and this type of service is taxable under GST.
The Government’s official
Transport and Logistics FAQ, specifically Question 4, gives a direct
answer. The FAQ clearly states that a truck broker who earns commission for
arranging trucks is liable to GST registration if his commission income
exceeds ₹20 lakhs in a financial year.
Question
4: I am a truck supplier/broker. My job is to get orders for truck owners. I quote
the rate for transportation to GTA on behalf of truck owners and I get a small amount
as commission out of the truck hire fixed with the GTA. This brokerage is paid by
the truck owners. As the services provided by way of transportation of goods by
road are exempt from tax, am I liable to registration?
Answer:
You are liable to registration if the aggregate amount
of commission received by you in a financial year exceeds Rs. 20 lakhs (Rs. 10
lakhs in special category States except J & K).
The FAQ also confirms
that this commission is taxable, even though the underlying
transportation service may be exempt. This means the exemption available to
road transport does not extend to the broker. The broker’s business is
different from transportation. He is not carrying goods, but only arranging vehicles,
and therefore, GST applies on his commission.
This position is also
supported by a detailed Advance Ruling issued by the Andhra Pradesh
Authority for Advance Ruling (AAR) in the case of M/s Deeraj Goyal,
dated 18 January 2021. In this case, the applicant acted as an intermediary
between truck owners and Goods Transport Agencies. He received commission from
truck owners after arranging loads for them. The AAR examined whether he should
be treated as a transporter, a Goods Transport Agency, or a commission agent.
The AAR made an important observation: a person becomes a GTA only when he
issues a consignment note, and the broker never issues such a note.
Therefore, the broker cannot fall under the category of GTA. The broker is also
not a transporter, because he does not own trucks or carry goods. He merely
facilitates the transaction between the GTA and the truck owner.
The AAR concluded that
the broker is an Agent or Intermediary under GST law. This is
based on the definition of “agent” given under Section 2(5) of the CGST Act and
the definition of “intermediary” under Section 2(13) of the IGST Act. An
intermediary is a person who arranges or facilitates the supply of services between
two parties but does not supply the service himself. Since a broker only
arranges the truck and does not actually transport goods, his activity is
considered a supporting service for transportation. Based on this, the AAR
classified his service under HSN Code 9967, which covers “supporting
services in transport.” The applicable GST rate is 18%, consisting of 9%
CGST and 9% SGST.
Another important point
clarified by the AAR is related to turnover. In many cases, GTAs send freight
amounts to the broker, and the broker deducts his commission before paying the
balance to the truck owner. The broker may feel that the entire freight amount
should be considered his turnover. However, the AAR clarified that only the
commission amount retained by the broker is considered his turnover under
GST. The freight amount belongs to the truck owner, not the broker. Therefore,
GST is payable only on the commission, not on the full freight.
Example:
In practical terms, this
means that if a broker receives ₹1,00,000 as freight from a GTA and keeps
₹3,000 as commission, GST is applicable only on ₹3,000. If the GTA pays the
truck owner directly and the truck owner pays the broker separately, GST is still
applicable on the commission. In all situations, the commission is the taxable
value. If the broker’s commission exceeds ₹20 lakhs in a year, he must take GST
registration and charge GST at 18% on all commissions.
Since the broker provides
a taxable service, he must issue a proper tax invoice to the truck owner
or GTA (depending on who pays him). The invoice should be issued under HSN 9967
with GST @18%. After registration, the broker is also eligible to claim Input
Tax Credit on business expenses such as office rent, mobile bills,
consultancy fees, etc., as long as they are used for business purposes and all
GST conditions are satisfied.
Conclusion: To
summarise, GST applies to brokers who arrange trucks for GTAs because they
provide a taxable intermediary or supporting service. This service is not
exempt, even though transportation of goods by road is exempt. Both the official
FAQ and the Advance Ruling make this position very clear. The broker
must register under GST when his commission income crosses ₹20 lakhs, must
charge 18% GST on his commission, and must maintain proper invoices and
records. This clarity helps brokers understand their GST obligations and avoid
future disputes.
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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