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GST Applicability on Services Provided by GTA to Another GTA
Introduction
The taxation of Goods
Transport Agency (GTA) services under the GST regime has consistently raised
interpretational challenges, particularly in cases where one GTA provides
services to another GTA. A common question that arises in practice is whether
such inter-se transactions are taxable, and if so, whether the liability falls
under reverse charge or forward charge. The answer depends primarily on the
nature of the service rendered and the option exercised by the supplier GTA.
This article provides a detailed legal and practical analysis of GST
applicability in such cases.
Legal
Framework and Definition of GTA
Under the GST law, a
Goods Transport Agency is defined as a person who provides services in relation
to the transport of goods by road and issues a consignment note. The issuance
of a consignment note is the distinguishing feature that differentiates a GTA
from a mere transporter or vehicle owner. Services provided by a GTA are
classified under GST Heading 9965, which covers transportation of goods by road
through a goods transport agency. In contrast, rental or hiring of transport
vehicles without assuming responsibility for goods is classified under GST
Heading 9966.
Therefore, determining
whether a transaction falls under GTA service or vehicle hiring is crucial for
deciding taxability.
Nature of
Transaction Between GTA and GTA
When one GTA provides
services to another GTA, the transaction can broadly fall into two categories.
In the first category, the supplying GTA undertakes transportation of goods,
issues a consignment note, and assumes responsibility for safe delivery. In such
a case, the transaction clearly qualifies as GTA service under Heading 9965 and
is taxable.
In the second category,
the supplier merely provides trucks or other goods carriages on hire to another
GTA without issuing a consignment note and without assuming responsibility for
the goods. In such cases, the activity is treated as rental of transport
vehicles under Heading 9966 and may qualify for exemption subject to
conditions.
Thus, the classification
depends on whether the supplier acts as a GTA or merely as a vehicle owner.
Taxability
When One GTA Provides Transportation Service to Another GTA
Where the supplier GTA
issues a consignment note and undertakes transportation of goods on behalf of
another GTA, the service is taxable under GST. There is no exemption available
merely because both parties are GTAs. The GST law treats each supply independently,
and the subcontracted GTA service constitutes a separate taxable supply.
Accordingly, such
services attract GST at either 5% (without input tax credit) or 18% (with input
tax credit - Notification No. 15/2025 - CT(Rate) dated 17.09.2025) (Upto
21.09.2025 it was 12%), depending on the option exercised by the supplier GTA.
Reverse
Charge Mechanism (RCM) vs Forward Charge
The liability to pay GST
in GTA transactions depends upon the option exercised by the supplier. Where
the supplier GTA opts to pay GST at the concessional rate of 5% without
availing input tax credit, the tax is generally payable under the Reverse
Charge Mechanism (RCM) by the recipient, provided the recipient falls within
the specified categories such as a registered person, company, partnership
firm, or body corporate.
Since a GTA is ordinarily
a registered person, services provided by one GTA to another GTA will typically
fall under RCM when the supplier has opted for the 5% scheme.
However, where the
supplier GTA opts to pay GST at 18% with the benefit of input tax credit, the
tax is payable under forward charge by the supplier itself. In such cases, the
recipient GTA is eligible to claim input tax credit, subject to fulfillment of
conditions under Section 16 of the CGST Act.
Exemption
in Case of Hiring of Vehicle to GTA
An important exemption
exists for services by way of giving on hire to a goods transport agency, a
means of transportation of goods. This exemption applies when a person merely
provides a vehicle to a GTA without issuing a consignment note and without undertaking
responsibility for the goods. Services involving the hiring of
vehicles to a GTA are exempt under Entry No.
22(b) of Notification No. 12/2017. This exemption extends to
vehicles hired by one GTA from another GTA
In such circumstances,
the activity is classified under Heading 9966 and is exempt from GST. However,
this exemption does not apply where the supplier acts as a GTA by issuing a
consignment note and performing transportation service. Many disputes arise due
to confusion between subcontracted transportation and vehicle hiring, and
therefore proper documentation is essential.
Compliance
and Practical Considerations
From a compliance
perspective, it is critical to determine whether a consignment note has been
issued and whether the supplier has exercised the option of 5% or 18%. The
transaction must be correctly reported in GSTR-1 and GSTR-3B, and where RCM is
applicable, the recipient GTA must discharge tax liability accordingly.
In subcontracting
arrangements, separate agreements should clearly specify the scope of
responsibility to avoid future litigation. Misclassification of services may
result in tax demands along with interest and penalty under Sections 73 or 74
of the CGST Act.
Conclusion
In conclusion, services
provided by one GTA to another GTA are generally taxable under GST when the
supplier issues a consignment note and undertakes transportation of goods. Such
services fall under Heading 9965 and are subject to GST at 5% or 18%, depending
upon the option exercised. Where the supplier merely provides vehicles on hire
without issuing a consignment note, the transaction falls under Heading 9966
and may qualify for exemption.
Therefore, the taxability
of GTA-to-GTA services depends not on the status of the parties but on the
nature of the transaction and the manner in which the service is structured and
documented. Proper classification and compliance are essential to avoid unnecessary
litigation and tax exposure.
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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