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Introduction
GST (Goods and Service Tax) was introduced by the government of India in 2017 under the indirect tax regime. This is a single taxation structure that is an outcome of the disadvantages or the hindrances that were faced by taxpayers. The GST tax structure came into force since the year 2017 and has been levied on goods and service across India. The GST tax levied is in combination of the CGST and the SGST which is the central GST and the State GST. Many products and services fall under the Nil charge of GST and the highest rate applied under this tax structure is 28%.
GST levied on the transport sector refers to all the modes of transportation i.e. through road, rail, airways and waterways. The levy of GST has eliminated the multiple taxes that were levied on the transport sector i.e. VAT, Service Tax, Central Excise Duty, Sales Tax, Purchase Tax, Entry tax, Customs duty, etc. The levy of GST on the transport sector has met with some resistance as was expected in case of any change in the system. However, the intent of introducing this taxation was to eliminate the multiple taxes levied that varied state wise and the cumbersome compliance that had to be adhered under each applicable tax law. The details of the GST levied on Transport sector is mentioned below.
Overview of GST on Transport
Transport industry is the lifeline of any country’s economy. Any disturbance or hindrance in the smooth functioning of the transport industry can have huge ramifications in the supply chain of the products and services as has been observed on many occasions, the most recent being at the time of lockdown in the start of 2020. The transport industry is thus crucial not only for the progress and efficiency of the industrial sector on the whole but also for that of the people of the country.
The levy of GST on transport as mentioned above is on all four of the modes of transport. The details of these modes of transport are mentioned below.
Road
Roadways are the most commonly used network for transport of goods and passengers across the country. The intricate network of roadways across the country ensures a faster and cheaper mode of transport and reach to the remotest parts of the country.
Rail
India has the densest network of railways across the globe. Rails are also considered to be a relatively faster and cheaper mode of transport for passengers and goods as well. The perishable goods are generally transferred through railways.
Airway
Airways are the costliest and the fastest mode of transport. Customers have to bear the additional cost of handling charges and taxes.
Waterway
Waterways are one of the most traditional and the cheapest modes of transport. It is often used to transport huge volumes of goods.
GST Rates for Transport Sector
GST rates on the transport sector vary depending on the mode of transport. Given below is a brief idea of the applicable GST rates.
GST on Air Transport
Particulars | Rate of GST |
Economy Class Tickets | 5% |
Tickets of chartered flights for the purpose of pilgrimage | 5% |
Business class air tickets | 12% |
Rental Services of aircraft (with or without operator)/chartered flights | 12% |
The rates above are subject to change periodically and notified by the government from time to time.
GST on Road Transport
In case of Road transport, the applicable rate of GST depends on the mode of transport chosen. Some of the general examples of such modes and the GST levied thereof are mentioned below.
Particulars | Rate of GST |
Public Transport for passengers | NIL |
Transport through metered auto rickshaw, e-rickshaw or taxi | NIL |
Transport through Non-AC Contract Carriage or Stagecoach | NIL |
Transport through AC Contract Carriage or Stagecoach (without Input Tax Credit) | 5% |
Transport through radio taxi and similar other services | 5% |
Transport through rental services for cars, buses, coaches, | 18% |
GST on Rail Transport
The incidence of GST in case of rail transport is levied on the passenger tickets and the rate depends on the type of tickets bought.
Particulars | Rate of GST |
AC and First Class Train Tickets | 5% |
Sleeper and general class tickets | 5% |
Metro Tickets or Tokens | 12% |
Exemption of GST on Transport
The government has also made provision for exemption from levy of GST on transport of certain goods. Some of the examples of such NIL tax rates are mentioned below.
- Pulses, milk, salt, flour, rice and other food grains
- Newspapers/magazines registered with Registrar of Newspapers
- Military or Defense equipment
- Agricultural produce/products and organic manure
- Relief materials allotted for victims of man-made/natural calamities, mishaps, accidents, etc.
- In case when the gross amount charged on the transportation of goods is less than Rs. 1,500
Furthermore, the levy of GST is also exempted in case of when the transport is in relation to,
- Transport of Household Goods
- Transport of goods of unregistered persons
Important Points to know about GST on the Transport Sector
As per the usual practices of the transport industry, goods can be transported through any of the two available modes. These modes are either a GTA (goods transport agency) or a transporter.
GTA is the mode of transport where the GTA is a service provider providing the service of transfer of goods through a fleet of hired vehicles. The transport owners, on the other hand, have their own vehicles i.e. are the owners of their transport modes.
The services offered by a GTA are loading and unloading of goods, packing and unpacking of such goods, transshipment and temporary warehousing.
Important point to note here is that to bring a transporter under the purview of GTA, the consignment note has to be mandatorily issued by the road transporter. If such consignment note is not issued then the service provider will not be considered under the ambit of GTA.
The issue of a consignment note indicates that the lien of goods has been transferred to the transporter. This means that the transporter is responsible for the goods till the time they are duly delivered to the consignee.
The rate of GST that is applicable on the GTA is dependent on availing of the input tax credit. The details of the same are tabled below.
Input Tax Credit | Rate of GST |
Availed | 12% |
Not availed | 5% |
The applicable rates in case of rental services are also tabled below.
Rental Services | Rate of GST |
Road Vehicles including trucks (with or without operator) | 18% |
Freight Aircraft (with/without operator) | 18% |
Water Vessels including Freight Vessels (with/without operator) | 18% |
Consignment Note
Consignment note is the document that is issued by the Goods Transport Agency (GTA) on the receipt of goods that are to be transferred to the consignee. These goods are to be transferred through the roadways. The details that are required to be provided under the consignment note are,
- Name of the consignor
- Name of the consignee
- Details of goods transported
- Place of destination
- Place of origin
- Registration number of the goods carriage in which goods are transported
- Serial number
- Incidence of tax on the consignor, consignee or GTA
eWay Bill
The eWay bill is a bill that is to be generated before any goods are transported. The eWay bill is a crucial document that is generated on the official portal for such Bill. It is also a very important document that is needed for compliance purposes under the GST rules. This document is a mandatory document for transport of goods between any locations whether within a state or otherwise. It is required for compliance in case of all GST registered individuals and businesses that are involved in the goods transport by road between such locations.
FAQs – GST on Transport
1. What are the businesses that have to pay GST under reverse charge in case of a Goods Transport Agency?
The businesses or the (recipients of services) that have to pay GST under the reverse charge are,
- A GST registered person
- Casual taxable person
- A body corporate that has been established by or under any law
- A society that has been registered under the Societies Registration Act, 1860 or under any other law
- Factory registered under the Factories Act,1948;
- A co-operative society established under any law;
- A partnership firm whether registered or not (including AOP)
2. What is the GST implication in case of input tax credit?
When a GTA claims the input tax credit, the GST rate applicable in this scenario is 12% and 5% in case the input tax credit is not availed.
3. What are the returns to be filed by a GTA?
The returns to be filed by a GTA are discussed below.
- Where GTA services fall under RCM – GTA registration is not required
- Where GTA is registered - file the normal 3 monthly returns i.e. GSTR-1 (sales), GSTR-2 (purchases-no ITC available) & GSTR-3 (monthly summary & tax liability).
4. What are the various services that are to be provided by a GTA?
The various services provided by a GTA are,
- Trans-shipment
- Packing/ unpacking
- Temporary warehousing etc.
- Loading/unloading
5. What are the essential documents that are required at the time of transport of goods?
The essential documents that are required at the time of transport of goods are consignment note and eWay bill.