Services provided by GTA liable to GST under RCM- Uttarakhand AAR

Introduction

Forward charge mechanism under GST is when GST is charged in the sales invoice by the supplier, same is collected from purchaser and finally deposited to govt. Reverse Charge Mechanism is the process of payment of GST by the receiver instead of the supplier. 

In this case, the liability of tax payment is transferred to the recipient/receiver instead of the supplier. As per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, ”goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. Notification No. 13/2017-Centra! Tax (Rate) dated 28.06.2017 in respect of RCM states that Supply of Services by a goods transport agency (GTA) in respect of transportation of goods by road to the following will be covered under RCM:-

1. any factory registered under or governed by the Factories Act, 1948(63 of 1948);or
2. any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or
3. any co-operative society established by or under any law; or
4. any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or
5. any body corporate established, by or under any law; or
6. any partnership firm whether registered or not under any law including association of persons; or
7. any casual taxable person

Will services provided by GTA are liable to GST under RCM where Consignment Note is not provided?

A similar issue was raised before the AAR Uttarakhand by Uttarakhand Forest Development Corporation (2020)

Facts of the Case

1. Applicant is a Government body constituted under State Assembly of Uttarakhand State and is sole agency for removal and sale of forest produce from the entire forest area in Uttarakhand.
2. The applicant after felling trees gets timber transported to its sale depots. For this purpose the applicant hires truck transporter from open market accordingly as per availability of vehicles and get transported to its sales depot from road head.
3. Due to unique nature of goods, the applicant itself fills Form 2.1 for transportation of goods which is called “Ravana”. Form 2.1 is printed format of applicant to transport timber from one place to another which carries details of material, vehicle no., name of driver & signature & other details. Thereafter the goods are handed over to transporter with signed Form 2.1.
4. The transporter has liability to transport goods safely to the destination sales depot of applicant.
5. The truck transporter after delivering the goods receives Form 3.3 from depot officer of applicant which proves that he has delivered the goods.
6. Thereafter depot officer verifies the goods as per Form 2.1 and return the same to Logging officer who dispatched the goods to sale depots. After receiving verified Form 2.1, the Logging officer makes the final payment to the transporter.
7. For completion of such process, the transporter uses their own trucks and sometimes the transporter hires the trucks for intended purpose.
8. The applicant makes payment of transportation charges to one person who accepted the transport of goods on pre decided rates by applicant. Further, transporters does not issue any consignment note.

Appeal to Authority of Advance Ruling (AAR)

Appeal was filed by M/s. Uttarakhand Forest Development Corporation seeking advance ruling on the following questions in terms of Notification no. 13/2017-Central Tax (Rate) dated 28.06.2017:

1. Whether a person, unregistered with GST, providing road transport services by his own truck is considered as GTA for RCM under GST?
2. Will issuance of E-way bill, Form 2.1 & 3.3 by or to road transporter who is unregistered with GST, providing road transport services by his own truck, be treated as consignment note for GST-RCM purposes?
3. Whether a person, unregistered with GST providing road transport services by hiring trucks from third party, to applicant, will be treated as GTA for RCM under GST?
4. Will issuance of E-way bill, Form 2.1 & 3.3 by or to road transporter who is unregistered with GST providing road transport services by hiring trucks from third party be treated as consignment note for GST-RCM purposes?

Reference by AAR to the required provisions of law:-

1. Section 2(98) has defined the term “Reverse Charge”. “Reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both.
2. According to Section 9(3), Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
3. According to Section 9(4), Government may, on the recommendation of the Council, by notification specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Observations

1. On perusal of legal provisions AAR found that the concept of RCM is incorporated under GST wherein the Government has notified not only supply of certain services but also supply of certain goods under RCM.
2. Under RCM the liability to pay tax is fixed on the recipient of supply of goods or services instead of the supplier or provider.
3. A list of goods on which GST is payable under section 9(3) is given in the Notification No. 4/2017-Central Tax (Rate) dated 28.06.2017 and the category of services on which tax is payable is given in Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017.
4. On perusal of Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017, AAR found that the services rendered by GTA falls under RCM. Also a service provided by GTA in respect of transport of goods by road is a taxable event.
5. As per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, ”goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.
6. AAR found that ‘consignment note’ has not been defined in the Act or in the Notification either. Therefore they referred Explanation to Rule 4B of Service Tax Rules, 1994 wherein ‘consignment note’ has been defined as a document provided by a goods transport agency against the receipt of goods for the transport of goods by roadways in a goods carriage.
7. The document contains the details like serial number, name of the consigner and consignee, registration number of the goods carriage in which the goods are transported, details of goods being transported, details of the place of origin and destination, and the person who will be liable for the service tax payable from the consignor, consignee or the goods transport agency.
8. Hence, in this case it can be treated that the applicant has made an arrangement in place of consignment note by issuing Form 2.1 in the style of bill which they handover to the transporters and after delivery of the goods, the transporters receives Form 3.3 from depot officer which proves that he has delivered the goods.
9. After verification of the goods as per Form 2.1, the payment is released to the transporters.
10. Also Form 2.1 issued by the applicant contains the name of the consignor and consignee, registration number of the goods carriage in which the goods are transported, details of the goods transported, etc.
11. Thus, AAR observed that the said Form is a consignment note in terms of Explanation to the Rule 4B of the Rules. Further the transporter is liable for safe delivery of goods to the destination.
12. We further observe that the purpose of issuing consignment note indicates that the lien on the goods has been transferred to the transporter and the transporter becomes responsible for the goods till its safe delivery to the consignee.
13. In the present case also, by issuing Form 2.1 by the applicant, the goods are handed over to the transporter and transporter becomes responsible for the goods till its safe delivery to the destination.
14. For the sake of argument that for being treated as goods transport agency issuance of consignment note is must.
15. If such argument is accepted than there will be no need to pay GST by a person providing service of goods transport merely on a ground that he is not issuing consignment note.
16. And this will open an avenue for evasion by the service providers. This must not have been the intention of the legislature to not tax the service providers who were not issuing consignment notes.

In view of the above discussion & findings, we hold that Form 2.1 may be treated as consignment note. Therefore, services received from the unregistered transporters by the applicant falls under the definition of “GTA’ services in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and the same are covered under ‘RCM’ in terms of Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017.

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