Goods Transport Agency refers to a business or entity that provides transportation services of goods by road and issues consignment notes, by whatever name called.
As only the term road is used in the definition, rail, sea or air transportation of goods does not get covered within the ambit of GTA.
A goods transport operator who does not issue a consignment note cannot be termed as a ‘Goods transportation agency’ under GST law.
It’s important for businesses engaging with Goods Transport Agencies (GTAs) to be familiar with the rules and regulations applicable under Goods and Services Tax law to ensure compliance with GST regulations.
GST rates on Goods Transport Agency (GTA)
In general, the GST rate on Goods Transport Agency (GTA) services is 5% (2.5% CGST + 2.5% SGST) with no Input tax credit (ITC) or 12% with Input tax credit (ITC), depending on the nature of the goods transported and the specific agreements in place.
This means, if the Goods Transport Agency charges 5% on the services and pays it to the government, then they can not claim input tax credit related to their business. This means charge 5% on your services and forget ITC.
On the other hand, if the GTA avails the option of taking input tax credit, then they have to charge GST at the rate of 12% and claim ITC. In this case, they have to maintain all the records to claim input tax credit and file GST returns which includes GSTR-1, GSTR-3B and GSTR-9 (if applicable).
When a registered Goods Transport Agency (GTA) charges GST to the recipient, it refers to a forward charge mechanism (FCM).
In the forward charge mechanism, the Goods Transport Agency (GTA) has to collect GST from the recipient of service and deposit it with the Government.
When Reverse Charge Mechanism (RCM) is applicable to a Goods Transport Agency (GTA)?
Reverse charge mechanism (RCM) to a Goods Transport Agency (GTA) is not applicable when the GTA has issued a tax invoice to the recipient charging tax at the applicable rates and has made a declaration on such invoice issued by them that they have taken registration and have exercised the option to pay tax on services of GTA in relation to transport of goods supplied by them during the financial year under forward charge.
Goods Transport Agency (GTA) has to exercise the option to pay GST under forward charge for a financial year by making a declaration in Annexure V by 15th March of the preceding financial year.
If a GTA does not submit a declaration for FY 23-24 by 15th March 2023, then it would be deemed that the GTA has opted for taxability under reverse charge. Further, such GTA cannot later opt to pay tax under forward charge for FY 23-24.
The option once chosen had to be consistently followed and there was no mechanism to shift between the options year on year i.e., the GTA once opted for forward charge could not shift to the reverse charge mechanism.
Reverse charge mechanism (RCM) to a Goods Transport Agency is applicable when the GTA does not opt to pay taxes under forward charge mechanism and such Goods Transport Agency (GTA) supply services to a recipient who falls under following specific categories;
- Any person registered under CGST / IGST / SGST / UTGST Act; or
- Any factory registered under or governed by the Factories Act, 1948; or
- Any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India; or
- Any co-operative society established by or under any law; or
- Any body corporate established, by or under any law; or
- Any partnership firm whether registered or not under any law including association of persons; or
- Any casual taxable person located in the taxable territory.
If the reverse charge mechanism is applicable to a Goods Transport Agency (GTA), then the recipient of the transportation service, rather than the GTA itself, is responsible for paying GST.
If Reverse charge mechanism (RCM) is applicable, then the recipient pays a flat 5% GST on the service value.
The recipient must account for GST under reverse charge mechanism (RCM) and can claim input tax credit (ITC) if eligible.
Table showing GST rates for a Goods Transport Agency (GTA)
| Option | GST Rates | Important Conditions |
| GTA Opting for reverse charge | 5% | Tax to be paid by the recipient of services under Reverse charge mechanism (RCM). |
| GTA Opting for forward charge | 5% or 12% | ITC is eligible, where GTA’s pay tax @ 12% ITC on goods or services used is not eligible where GTA pay tax @ 5%. No need to pay liability under Reverse charge mechanism (RCM) in both the cases by recipient of services. |
Exemption to GTA under Goods and Services Tax
Here are the most important exemptions that are applicable to a Goods transport agency (GTA);
- Transport of specific goods like Relief materials to support disaster relief efforts, agricultural produce to incentivize agricultural activity, Milk, salt & food grains, Organic manure to promote sustainable practices, Defense or military equipment, Newspapers or magazines.
When total charges for transporting a single consignment within a single carriage do not exceed 1,500 rupees.(Not applicable as Notification no. 12/2017- Central Tax (Rate) dated 28th June 2017 withdrawn vide notification no. 04/2022- Central Tax (Rate) dated 13th July 2022)When total consideration for transporting all goods to the recipient is less than 750 rupees.(Not applicable as Notification no. 12/2017- Central Tax (Rate) dated 28th June 2017 withdrawn vide notification no. 04/2022- Central Tax (Rate) dated 13th July 2022)
Importance of Declaration to opt between FCM or RCM
If a Goods Transport Agency is currently paying tax under forward charge and it wishes to continue paying the tax under forward charge, then such GTA need to submit the declaration.
If such declaration is not given, then it would be deemed that the GTA has opted for taxability under reverse charge.
If a Goods Transport Agency is currently covered under reverse charge and it wishes to continue paying the tax under reverse charge, then such GTA is not required to submit any declaration.
However, if the GTA who is covered under reverse charge chooses to shift to forward charge, then it needs to give the declaration.
Below table will help you to understand the concept better;
| Option presently followed by Goods Transport Agency (GTA) | Proposed option by Goods Transport Agency (GTA) | Action to be taken |
| FCM | FCM | File declaration |
| FCM | RCM | No declaration required to be submitted. GTA to ensure that tax is charged under Reverse charge mechanism (RCM). |
| RCM | RCM | No declaration required to be submitted. |
| RCM | FCM | File declaration. Even if charged under Reverse charge mechanism (RCM) earlier, may charge under FCM by providing declaration. |
As each GSTIN constitutes a separate distinct person under the GST law, the declaration needs to be submitted for each such GST number separately.
Further, the declaration form requires a dated acknowledgement of each jurisdictional GST authority. As there are jurisdictional GST authorities for each GSTIN, therefore a separate acknowledgment must be obtained for each of the authorities under whose jurisdiction the registration has been obtained.
Key Takeaways
- GTA can exercise the option to pay GST under forward charge by paying @ 5% without ITC or @ 12% with ITC. Option to be exercised within a time frame in Annexure V. Invoice requires a declaration in the format specified in Annexure III.
- RCM not applicable where the supplier of service has GST registration and has exercised the option to pay GST under forward charge; issued invoice and made declaration prescribed in Annexure III on such invoice.
- Where GTA does not exercise the forward charge option, GST at 5% under RCM to be paid by the recipient. No ITC on goods and services used in supplying the services.
