Know the Right GST Facts on Multimodal Transportation

Know the Right GST Facts on Multimodal Transportation

Do you use more than 1 mode of transport for your goods? Are you aware of the proper GST regulatory system for this type of transport?

• This article addresses all the necessary things you need to bear in mind while using various modes of transport.
• Users are likely to make some errors in handling GST for these modes of transport, but this article will answer all your questions and fix any issues.

Who is the multimodal transporter?

Multimodal Transportation: If the total trip of your goods involves more than 1 mode of transport, it is named Multimodal Transportation.

Let’s use an illustration to understand this.

• You’re transporting jackets from Kolkata to Shimla. The Carrier first sends the goods by the Goods Train from Kolkata to Kalka Railway Station. He then uses a truck to transport the goods from Shimla train station to Kalka.

To explain this, let’s look at it another way.

• Let’s assume that a businessman is transporting tiles from Morbi to Agartala. The Transporter will first transport the Tiles from Morbi to the Port of Navlakh.
• Then he takes them from Navlakhi Port to Haldia Port by water, and then to Guwahati by rail. Afterward, he’ll take the Tiles by the road to Agartala.
• As you can see, the Transporter uses Road, Water and Railways as a mode of transport; this mode of Transportation is called Multimodal Transportation.

But what if Mode were the same, but different vehicles were used?

• The normal practice in the transport sector is to move goods from one truck to the other during the journey.
• In this case, the model continues to remain the same, but the vehicles are different.
• This type of transport activity is called transshipment.
• Above case does not qualify for multimodal transport but is referred to as multi-vehicle transport.

Place of supply in case of a multimodal transport service:

Basis of determination of place of supply will be under section 13(9)(where the receiver or the supplier are outside India) & accordance with Section 12(8) of Integrated Goods and Services Tax Act (where the receiver and the supplier are in India)

1. Where the recipient and the service provider are located in India

• • Pursuant to u/s 12(8) of the Integrated Goods and Services Tax Act, the location of the delivery of services by means of the transport of goods where the recipient is a registered person shall be the location of that person.
  • In cases where a recipient is an unregistered person, the place of delivery shall be the place where the goods are delivered for transport.
  • Thus, in the case of multimodal transporter services, if the customer ‘A’ who is a registered person hands over the goods to the carrier ‘B’ at his factory gate, the place of supply would be the location of the customer ‘A.’
  • In the eyes of the consumer is unregistered, say ‘C’ who is located in Delhi, hand over his goods to the carrier situated in Mumbai, the place of supply would be ‘Mumbai.’
  • Fortunately, a new provision of U/s 12(8) has been incorporated in the Integrated Goods and Services Tax Amendment Act, which provides that, where the destination of the goods is outside India, the destination of the goods shall be the place of supply.
  • Because the entrance of a multimodal transporter will not apply in cases where the destination of the goods is outside India, the newly inserted provision would not apply to a multimodal transporter.

• 2. In case the supplier or recipient are located outside India

• • Place of supply for transportation of goods would be the destination of such goods.
  • There would also be cases where the recipient of the service would be located outside India, but it would require that the goods be transported from a place in India to a location in India.
  • Presuming a situation where ‘A’ customer, located outside India, hires ‘B’ carrier to transport goods from Delhi to Mumbai and uses multiple modes of transport such as road and rail. This would be the case for multimodal transport, and the place of supply would be Mumbai, as it is the location of the goods.
  • However, if the final destination of the goods is outside India, that destination would be the place of supply and the entry of multimodal transport would not apply.

The provisions of the GST

• Fortunately, in GST, the Multimodal Transporter is not referred to as the Multimodal Transporter!
• The regulations for transporters are set out in the CGST Rate Notification 11/2017, which states that the transporter will charge money instead of freight.
• Transporter will work as a principal and not as a contractor.
• In addition, as per this notification, the carrier will have to collect 12 % of GST as a forwarding charge from the customer.

What’s to bear in mind?

If you’re in this business and you’re wondering what you should keep in mind, are the most key points:

1. Transportation may be referred to as multimodal transport only if the loading and unloading point is located in India.

• • Guess you’re transporting goods from Kolkata to Kathmandu, and they’re traveling by rail from Kolkata to Bathnaha Railway Station in Nepal and then on the road to Kathmandu. This will not be made reference to as multimodal transport as the destination of goods change and unloading is not in India but in a foreign country of Nepal.
  • In this case, the carrier does not qualify as either a Goods Transport Agency or a Multimodal Transporter. It must therefore charge GST @18 % on the amount of freight received from the customer.

2. Although there is a provision in the Indian Contract Act 1882 for a Verbal Contract, you must preserve legal agreements.

• • We say that since the phrase “Enter into a contract” has been used in the GST Notification, and you may be asked by the GST Officer to indicate a binding agreement in the case of assessments, investigations/audits

3. The Consumer shall not be able to pay the GST on transport charges in reverse charge, as the reverse charge is only permitted in the case of the Goods Transport Agency.
4. Having been caught in the case of multimodal transport is very easy, as every time the mode of transport changes, an entry is made in the E Waybill. In which officers get to see more than 1 entry in the E Waybill, they will create a Tax Demand citing a Multimodal Transportation case.
5. The use of the SAC Code 9965 in the Tax Invoice, as well as the Transport Agency, will make no difference to Multimodal Transporters.
6. Suppose the case where the Multimodal Transporter hires a Truck from a Third Party for the road transportation of the Goods.

The reverse charge will apply in this situation, provided that the truck has been employed by the Goods Transport Agency.

This is not the case also because CGST Rate Notification 11 & 12 clearly distinguishes between the Multimodal Transporter and the Goods Transport Agency.

But Issue starts when the truck is hired by the owner of the truck. That’s because the owner of the truck will not issue a consignment note.

GST rate for multimodal transport:

At its 21st meeting, the GST Council proposed a GST rate of 12 % with full ITC on-forwarding charges for composite multimodal transport. Notice No. 13/2018-Central Tax of 26.07.2018 delivered by the Government for this purpose. Now Multimodal transport of goods taxed @ 6 % under CGST. Total GST Rate = 12 % (CGST + SGST); IGST = 12 %

If we read Notification 12 in detail, we will learn that the services offered by the owner of the truck are exempted, which does not raise the issue of any reverse charge. But In many cases, GST Dept officers have been found choosing the route of litigation.

 

This would be our effort to describe the whole idea in a concise way. If you are also faced with a problem or confusion related to this matter, please feel free to contact the Rajput Jain and Associates team, and as an RJA team will assist you to resolve all your questions along with offering realistic solutions to your GST concerns!!!

FOR FURTHER QUERIES CONTACT US: W: www.carajput.com  E: singh@carajput.com T:  9-555-555-460

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