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GST On Transportation By Road

This comprehensive guide provides insights on GST implications for transportation businesses, including composite supply, mixed supply, valuation, ITC, and place of supply. Learn about key concepts and implications for seamless compliance.

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GST On Transportation By Road

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  1. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business GST On Transportation By Road - CA Madhukar N. Hiregange

  2. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business • 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

  3. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business • Composite Supply 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

  4. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business • 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.

  5. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business • 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

  6. 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%

  7. 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

  8. Other Aspects Credit Chain Break 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

  9. 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

  10. 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%

  11. Place of Supply - Transporters • Overview • Time & Place of Supply • Valuation & ITC • Impact on Business When Service Provider (SP) & Recipient of Service (RS) are within India: Transportation of Goods Registered Person NO YES POS shall be location of such person POS shall be location at which such goods are handed over for transportation

  12. Place of Supply (POS) - International • Overview • Time & Place of Supply • Valuation & ITC • Impact on Business Recipient of Service is outside India:

  13. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business Restriction on ITC a) Motor Vehicles • Transportation of goods, or • Making the following taxable supplies: • Further supply of such vehicles/ conveyances, or • Transportation of passengers, or • Imparting Training for driving/ flying/ navigating such vehicles/ conveyances Except when they are used for: ITC for Motor Vehicles will NOT be available Whether eligible for R&M and insurance of Motor vehicles? (Ambulance, MD car, etc.) – Yes but to note that if partly used for business and partly for non-business then 5% reversal of common credits required.

  14. Transportation of Goods by:- Credit on MV Spares, Lubricants, Service, Insurance ….. • Mining • Courier • Manufacturer • Job worker • Outdoor caterer/ Shamiana contractor • Trader • Builder/ Contractor • …………

  15. 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

  16. 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?

  17. 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

  18. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business • Business Impact

  19. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business • Business Impact

  20. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business • Areas of Issues

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

  22. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business Impact on Logistics - Road

  23. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business Impact on Logistics - Road

  24. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business Impact on Supply Chain Management

  25. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business Impact on Freight Forwarding

  26. Overview • Time & Place of Supply • Valuation & ITC • Impact on Business Impact on Package Handling

  27. Restructure for B2B with credit & B2B – no credit + exempted products • Two Entities • New Vehicles in A – new entity

  28. 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?

  29. 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…..

  30. “ We cannot change what we are not aware of, and once we are aware, we cannot help but change” – Sheryl Sandberg ET ST VAT ED - CA Madhukar N Hiregange madhukar@hiregange.com

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