Article on Taxability of Ancillary Services Provided by GTA

Taxability of Ancillary Services Provided by GTA

As we know that the goods transport agency (GTA) has the option to pay tax under Forward charge or to shift the tax burden on the recipient i.e., RCM. Sometimes in addition to providing the transportation facility to the recipient some ancillary services are also provided by the goods transport agency like the services of loading, unloading, packing & unpacking of goods. In such situation the common doubt arise about the taxability of such ancillary services provided by GTA. In this article we will try to analyse about the GST implications of such ancillary services.

Before going into detailed discussion it is important to know about the concept of composite & mixed supply under GST. The composite supply means a supply consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. As per section 8 of CGST Act 2017 the tax liability in case of composite supply would be attracted at such rate which is applicable to such principal supply.

On other hand mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. As per section 8 of CGST Act 2017 in case of mixed supply it shall be treated as a supply of that particular supply which attracts the highest rate of tax.

Earlier there was confusion among the taxpayers that whether incidental/ ancillary services such as loading, unloading, packing, unpacking, transshipment etc., provided in relation to transportation of goods by road is to be treated as part of Goods Transport Agency service, being composite supply, or these services are to be treated as separate independent supplies. The same issue was also addressed in the 54^th GST Council Meeting that when ancillary/intermediate services are provided by GTA in the course of transportation of goods by road and GTA also issues consignment note, the service will constitute a composite supply and all such ancillary/intermediate services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc. will be treated as part of the composite supply. If such services are not provided in the course of transportation of goods and invoiced separately, then these services will not be treated as composite supply of transport of goods.

Thus in view of the above recommendation of GST Council the CBIC has issued a Circular No. 234/28/2024-GST. Para 6 of Circular No. 234/28/2024-GST is relevant in this respect and the same is laid down as follows;

“ 6. Whether incidental/ ancillary services such as loading/ unloading, packing, unpacking, transshipment, temporary warehousing etc., provided in relation to transportation of goods by road is to be treated as part of Goods Transport Agency service, being composite supply, or these services are to be treated as separate independent supplies:

6.1 Representations have been received to clarify whether incidental/ ancillary services such as loading/ unloading, packing, unpacking, transshipment, temporary warehousing etc., provided in relation to transportation of goods by road is to be treated as part of Goods Transport Agency (GTA) service, being composite supply, or these services are to be treated as separate independent supplies.

6.2 It has been brought to notice that enforcement agencies are raising demands for such services holding them leviable to GST at the rate of 18% by interpreting last para of Question No. 6 of the FAQ issued by CBIC which states that "If such incidental services are provided as separate services and charged separately, whether in the same invoice or separate invoices, they shall be treated as separate supplies", to mean that if a GTA shows packing charges, loading, unloading charges etc., separately in the invoice, the GTA becomes liable to pay GST at the rate of 18% on these services by treating them as cargo handling services.

6.3 After deliberations on the issue and based on recommendations of the 54th GST Council, it is hereby clarified that ancillary or incidental services provided by GTA in the course of transportation of goods by road, such as loading/unloading, packing/unpacking, transshipment, temporary warehousing etc. will be treated as composite supply of transport of goods. The method of invoicing used by GTAs will not generally alter the nature of the composite supply of service. However, if such services are not provided in the course of transportation of goods and are invoiced separately, then these services will not be treated as composite supply of transport of goods”.

Thus from the above circular it is clear that the incidental services provided by GTA in the course of transportation of goods by road, such as loading/unloading, packing/unpacking etc. will be treated as composite supply of transport of goods. However, if such services are not provided in the course of transportation of goods and are invoiced separately, then these services will not be treated as composite supply of transport of goods.

Relevant Judgement:

The advance ruling pronounced by the Telangana Authority for Advance Ruling in case of M/s DRS Dilip Roadlines Limited [2024(04)LCX0103(AAR)] is relevant in this regard which is summarised as follows;

The applicant is a GTA and have opted to pay tax under Forward Charge. They have submitted that transportation of goods is their main activity and packing, loading, unloading & unpacking are ancillary to their main activity and that their clients prefer their services as they provide all the above services. The question raised by the applicant is whether the supply of services including transportation, packing, loading, unloading & unpacking forms a single bundled supply, and whether the principal supply in this transaction is transportation.

The advance ruling authority observed that all services rendered in relation to transportation of goods including packing, loading, unloading & unpacking fall under this entry provided that such services have a direct and immediate link with the agreement for transport of goods i.e., the contract shall be for transport, packing , loading, unloading and unpacking of the same goods.

Therefore, if the transactions made by the applicant are in substance contracts for transport, packing, loading, unloading of the same goods entrusted by their customers, then such services fall under goods transport agency.

Conclusion: The incidental services provided by GTA in the course of transportation of goods by road will be treated as composite supply of transport of goods. However, if such services are not provided separately and also invoiced separately, then these services will not be treated as composite supply of transport of goods.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.