GST Impact On Transportation of Goods – RCM, Time and Place of Supply

GST Impact On Transportation of Goods: Check Impact of GST on Transportation By Road with Rates, HSN Codes, Place of Supply, Valuation, ITC & Time of Supply. Goods and Services Tax (GST) is a flawless taxation system which would enhance transparency and timely compliances in the taxation structure. The success of GST depends upon its proper implementation and I believe if the appreciations among people are conquered, we can make a quantum leap towards a bright future.Now check more details for Impact of GST on Transportation of Goods Industry from below…

GST Impact On Transportation of Goods

GST Impact On Transportation of Goods

Composite Supply

What is Composite Supply?

A supply naturally bundled in the course of business, consisting of:

  • One or more goods/services
  • Service + Goods
  • Principal Supply (Essentiality concept) – Tax rate is determined based on such supply.
  • Ex: Loading/unloading + storage + Logistics services

Why is it essential?

  • The Software must be able to identify a service, which has more than 1 service.
  • Operations personnel must understand the concept of Principal Supply, as it must be decided by a person who has experience in the  logistic sector.
  • The rate at which the service is taxable, and the classification is dependent on above.
  • If possible, streamline the sub-heads in the revenue line to ease such above procedure

Mixed Supply

What is Mixed Supply?

A two or more supplies provided at a single price, which is not a composite supply.

Ex: ‘All in 1’ pricing mechanism, may be avoided.

Taxability – GST shall be payable on entire value at the highest rate applicable for service forming part of the mixed supply.

Any consequences?

  • A single price is keyed in for various services provided. The Software may not be able to distinguish the same from a standalone service.
  • Operations personnel must understand the concept of Composite Supply and its relation to Mixed Supply.
  • Taxable at the highest rate applicable from the various services provided.
  • Suggested to convert such transactions into Composite supply in GST

Classifications Possible- Rate

  • Hiring of Vehicle/ Renting? – 28%
  • Leasing of vehicle – 28%
  • Transporter ( Lorry owner/ operator) – nil
  • GTA – in relation to transport + Consignment note issued – 5% + RCM
  • Courier – 18%
  • Storage & Warehousing – 18%
  • Packing – 18%
  • Logistics , Freight Forwarders – 18%
  • Business Support?- 18%

Transportation- goods – Exemptions

  • Entry 7 of Not. 12/17 – Govt also liable for transportation of goods to entity upto 20 Lakhs – No condition
  • Entry 8 – Govt to another govt – Liable for same
  • Entry 9 – Govt services upto 5K – Liable
  • E 18 – Transportation other than GTA or courier –Nil
  • E 21- agricultural produce, less than 1500 or 750 or milk, salt, food grain including flour, pulses and rice.or organic manure, newspaper, defense/ military
  • E 22 – Hiring to STC or GTA – Nil

Other Aspects

  • Rate – 5% without ITC – forward charge
  • Reverse Charge – GTA to factory, society, co-operative, regd under GST, partnership + Aop, Casual Taxable person. – No need to register but enroll and file ENR-1??
  • Difference b/n GTA & Transporter
  • Whether B2B- whether credit available?
  • Whether B2C – whether credit available?
  • What about hamali, storage, packing in course?
  • Logistic provider engaging GTA? Credit

Difference B/n Transporter & GTA/ Courier

  • One does not issue Consignment note which can be endorsed ( negotiable) : Auto- intra city movement, daily/ weekly bill issued
  • Door to door express cargo service ( pick up & drop to specific location + time commitment. Thin line

Difference b/n hiring & transfer

  • Hiring = with driver – risk of vehicle with the owner – 18%
  • Transfer of right = Give for some time- daily/ weekly/ monthly – Rate as applicable to truck – 28%

Place of Supply – Transporters

When Service Provider (SP) & Recipient of Service (RS) are within India:

Place of Supply Transporters

Place of Supply (POS) – International

Recipient of Service is outside India:

Nature of ServicePlace of Supply (POS)
1.Services supplied in relation to Goods which are made available to the recipient or his agentLocation where Services are Actually Performed
2.Where the Services are Supplied to more than one location, including location in Taxable TerritoryLocation of Taxable Territory
3.Where the Services are Supplied to more than one State or Union territoryPOS shall be Location in each state where such supply made
4.Services in relation to Transportation of Goods, other than by way mail or courierPlace of Destination of Such Goods
5.Any other casesLocation of Recipient of Services

Restriction on ITC

Restriction on ITC

Calculate Additional Credit

  • Vehicle cost – 5 L – GST 1.40 Lakhs
  • Servicing & spares per year – 2 Lakhs – 0.40 Lakhs
  • Lubricants – 10 Lakhs – 2.80 Lakhs
  • Bank etc 2 Lakhs – 0.40
  • Reduced cost of Diesel- open now- Crude around $45

Per truck – 1st year – 6.20 Lakhs loss

Who can avail the credit?

  • Trader/ Importer
  • Manufacturer
  • Service provider
  • CHA
  • Freight Forwarder
  • GTA services availed and passed on with margin. Can 2 issue GTA?

Who cannot avail the credit?

  • Unregistered Dealer
  • Exempted Goods/ Service providers: Educational/ Health Care/ Government/ Religious
  • Exporters ,SEZ, EOUs will have to go for refund

Impact on Business

  • Erosion of large un-organized players but Large investments, FDI’s & stiff competition expected from organized players
  • Customer Perception as benefit to industry – Anti-profiteering
  • Consolidation of warehouses – Central warehousing / Larger facilities to be established
  • Existing warehouses to be shifted to more strategic locations due to changed business scenario
  • Higher logistics preference due to removal of warehouses
  • More transportation time due to check post delays being avoided
  • Eligibility of VAT credits on vehicle/capital goods used for movement of goods
  • Relations & compliance of vendors & customers
  • Aviation Fuel, Petroleum products outside GST
  • Widened Tax base
  • For ex: Imports &
  • Exports billed in India
  • Increase in rate of Tax
  • Registration, Returns, Matching principle & Invoicing challenges

Areas of Issues

  • GTO also must be brought within the Tax Net – No distinction between GTA & GTO – similar tax treatment for both
  • Law relating to E-Way bills must be eased
  • Clear distinction between GTA and Courier services to avoid disputes in GST
  • Back door state trade barriers must be avoided – Permits must be online and hassle free
  • Accidental Damages – Earlier not includible in value
  • Increase in Rate of Tax

RCM Liability

  • Presently 5-7% is minor costs incurred
  • RTO checkpost
  • Snacks
  • Maintenance
  • Repair
  • Hamali
  • Rent for stop/ hotel
  • …many many more

Impact on Logistics – Road

ParticularsEarlier RegimeGST Regime
ApplicabilityTaxableTaxable
Rate of Tax
  • GTA  – 4.5%
  • GTA (used household) – 6%
  • Courier – 15%
  • End to End Package – 15%
  • GTA  – 5% with no ITC
  • GTA (used household) – 5% with no ITC
  • Courier – 18%
  • End to End Package – 18% (Concept of composite/mixed supply may arise – need to be analyzed on case to case basis.)
ClassificationGoods Transport Agency / Courier Services, Cargo HandlingGoods Transport Agency / Courier Services, Cargo Handling
Value / AbatementGross Value

  • GTA  – 30% & 40% in case of used household goods)
  • Goods in Container – 40%
  • Courier – 100%
  • End to End Package – 100%
  • On Transaction value – unless related party transactions.
  • Add: related exp recovered,
  • Less – pre agreed discounts
Time of SupplyOn Issue of invoice – (when not issued within 30 days – date of completion)

If advances received – on receipt

On Issue of invoice – (when not issued within 30 days – date of completion)

If advances received – on receipt

Place of SupplyIn Domestic – Not Relevant

In International

  • (a)GTA – Place of location of the payer of freight;
  • (b)Courier – Place of performance;
  • (c)If SP & SR located in TT – location of recipient
In Domestic

  • (a)Registered person – Location of such person
  • (b)Other than Regd Person – Location where goods are handed over for transportation

In International

  • (a)GTA – Place of Destination;
  • (b)Courier – Place of Performance;
  • (c)If SP & SR located in TT –  location of recipient
Exemptions•UN / Specified International orgns
•Bio-medical waste / common effluent Treatment
•Upto Rs.750/ 1500
•Agro produce, defence, newspaper, chemical fertilisers, milk, rice etc
•UN / Specified International orgns
•Bio-medical waste / common effluent Treatment
•Upto Rs.750/ 1500
•Agro produce, defence, newspaper, milk, rice, organic manure, etc.
Reverse chargeIn case of GTA other than for individuals and HUFIn case of GTA other than for individuals and HUF

Impact on Supply Chain Management

ParticularsEarlier RegimeGST Regime
TaxabilityTaxableTaxable
Rate of Tax15% (14% + 0.5% + 0.5%)18%
ClassificationService – Storage & warehousingService – Storage & warehousing
Value – abatementOn Gross Value chargedOn Transaction value – unless related party transactions Add: related exp recovered, Less – pre agreed discounts
Time of SupplyOn Issue of invoice – (when not issued within 30 days – date of completion)

If advances received – on receipt

Earlier of:

  • Receipt of Consideration/advance,
  • Issue of invoice
  • 31st Day from completion of service
Place of SupplyDomestic – Not relevant

International – Location of immovable property

  • If represented as ground rent: could be considered as service related to immovable property and PoS would be location of warehouse.
  • If represented as warehousing charges:  PoS would be location of service recipient.
ExemptionExemption – Storage of agriculture produce & rice + CottonExemption – Storage of agriculture produce & rice
Reverse chargeNot applicableNot applicable

Impact on Freight Forwarding

ParticularsEarlier RegimeGST Regime
Rate of Tax15% (14% + 0.5% + 0.5%)18%
ClassificationService – Storage & warehousingService – Storage & warehousing
Value – abatementOn Gross Value chargedOn Transaction value – unless related party transactions . Add: related exp recovered, Less – pre agreed discounts
Time of SupplyOn Issue of invoice – (when not issued within 30 days – date of completion)

If advances received – on receipt

On Issue of invoice – (when not issued within 30 days – date of completion)

If advances received – on receipt

Place of SupplyLocation where services are actually performedTax to be charged as per PoS which would be as below:

  • Supply to registered person: Location of service recipient. Can be identified based on GSTN of recipient.
  • Supply to unregistered person: “Address of recipient on record of company” – There may be no such cases
ExemptionExemption – cargo handling of agriculture produce + rice, cottonExemption – cargo handling of agriculture produce + rice
Reverse chargeNot applicableNot applicable

Impact on Package Handling

ParticularsEarlier RegimeGST Regime
TaxabilityTaxableTaxable
Rate of Tax15%18%
ClassificationBusiness Auxiliary ServicesBusiness Auxiliary Services
Value – abatementOn Gross Value – Commission retained/received- no abatementOn Transaction value – unless related party transactions . Add: related exp recovered, Less – pre agreed discounts
Time of SupplyOn Issue of invoice – (when not issued within 30 days – date of completion)

If advances received – on receipt

Earlier of:

  • Receipt of Consideration/advance,
  • Issue of invoice
  • Completion of service
Place of SupplyDomestic – Not relevant

International – No cases

Tax to be charged as per PoS which would be as below:

  • Supply to registered person: Location of service recipient. Can be identified based on GSTN of recipient.
  • Supply to unregistered person: “Address of recipient on record of company”
ExemptionNo ExemptionNo Exemption
Reverse chargeNot applicableNot applicable

Restructure for B2B with credit & B2B – no credit + exempted products

  • Two Entities
  • New Vehicles in A – new entity

GTA service taken & passed on

Freight Forwarder, Logistics for Exporter, B2C, B2B no credit ( power, education, healthcare….

  • A. As pure agent ( no margin)
  • B. As margin adder – Use of consignment note of passer on?

Specific Issues – Interactive Discussion

  • Delegates issues……..
  • Revised BGM — August Middle?
  • Faculty Identification Program – August 2017?
  • Further questions – pdicai.org
  • Online certificate course available
  • GST evaluator, member of group…..

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