Impact of GST on GTA Services

In the pre-GST regime, if a manufacturer is located in one state, he sets up warehouses in multiple locations in each state; at least definitely in various geographies – central, western, north and south, and also in maybe multiple other states. Now the goods are transported by the manufacturers to warehouses and then from warehouses to distributors and retailers further down. Typically, the transportation would happen through a full truckload system from the manufacturer to warehouses, and then from warehouses to distributors and retailers in less than truckload format by the subsequent transportation house.

Post the implementation of GST, we expect the number of warehouses to get consolidated eventually to one or two large warehouses. So the number of warehouses will come down. At the same time, the quantum of goods that is getting transported will increase significantly. So, a single warehouse will handle a larger quantum of input. So effectively, you’ll have much bigger trucks and possibly carrying over a longer distance between manufacturer to warehouses. So, we will see higher tonnage trucks being used and we will also see operating efficiencies coming in from scale economics. From warehouses to distributors and retailers, the chain will become wider because now from a single warehouse, the goods will get distributed to many distributors. So this segment can be handled depending on the type of goods or the nature of goods by less than truckload or full truckload; distributor to retailer would be obviously less than truckload format.

GTA services such as Cab rides could get marginally cheaper for customers. The incidence of tax will come down to 5% from 6% for bookings made on cab aggregators like Ola and Uber. 100% tax will be payable by E-commerce aggregator under reverse charge mechanism for GTA services of Radio taxi or Passenger Transport Services provided by a Taxi driver or Rent-a-cab operator to any person. Moreover, buses (including minibuses) and pick-up vans, carrying more than 10 individuals, will be subjected to no extra cess.

Non AC train travel (including in local trains and metro) has been exempt under GST. AC train travel will attract 5 % GST. Ticket prices for AC trains will increase marginally as current service tax is at 4.5 %. The rate is kept low as they will not be allowed Input Tax Credit. (Exemptions: Travelling in metro; Local trains; and Religious travel including Haj yatra).

Tour and Travel: Cheap for the common people, expensive for the business class
Service Old GST Diff
Non Ac Rail Ticket 0 0 0
AC Rail Ticket 4.5 5 +0.5
Transporting goods by train 4.5 5 +0.5
Transporting goods by truck 4.5 5 +0.5
Tour operator 9 5 -4
Cab service 6 5 -1
Air Economy 6 5 -1
Air Business 9 12 +3

Not all transport of goods by road is by a GTA. To qualify as GTA services, the GTA should be necessarily issuing a consignment note. Only services provided by a GTA are taxable under GST. Services of transportation of goods by a person other than GTA are exempt. Moreover, in cases where the GTA services is availed by the specified categories of persons in the taxable territory, the recipients who avail such services are the ones liable to pay GST and not the supplier of services unless the GTA opts for collecting and paying taxes @ 12% (6% CGST + 6% SGST).

In all other cases where GTA services is availed by persons other than those specified, the GTA services supplier is the person liable to pay GST. The GTA services supplier is not entitled to take ITC on input services availed by him if tax is being charged @ 5% (2.5% CGST + 2.5% SGST). In case the GTA services supplier hires any means of transport to provide his output service, no GST is payable on such inputs.

In a nutshell, the GST law continues the provisions prevailing under the Service Tax regime. The law recognises that pure transportation of goods services are mostly provided by persons in the unorganised sector and hence has specifically excluded such operators from the tax net. In respect of those who provide agency services in transport, the liability is cast on the recipients in most of the cases or unless option to pay under forward charge has been exercised by the GTA services provider.

Also Read : Set up Teams To Boost GST Registrations – Says Modi To States