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2025 (2) TMI 720 - AAR - GSTExemption from GST - Whether the activity of the transportation of goods by the Applicant will be exempted under entry no. 18 of Notification no.12/2017-Central Tax (Rate) dated 28.06.2017? - HELD THAT - On perusal of the meaning of the GTA it is clearly seen that issuance of the consignment note is an essential condition for any person to act as GTA. If such a consignment note is not issued by the transporter the service provider will not come within the ambit of GTA. If a consignment note is issued it indicates that the lien on the goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till it s safe delivery to the consignee. Interpretation of meaning of term consignment note - HELD THAT - On perusal of the meaning of the term consignment note it is conspicuous that the goods are received by the goods transport agency either from the consignor or the consignee of the goods the details of which are mentioned in the consignment note along with the description of the goods being transported. The service of transportation of goods is sub-contracted to the applicant by the Principal GTA. Effectively it appears that the contract to undertake transportation of goods is given by the consignee/consignor to Principal GTA and not to the applicant. The consignee/consignor may not be aware that the transportation will be done by the applicant. It is also possible that such sub-contract may/can also be given to some other party by the Principal GTA - the applicant is giving only vehicles to Principal GTA and thus it is Principal GTA which has the transportation contract with the consignee/consignor. Thus the transaction in this case would be one of renting of vehicles and not that of a Goods Transport Operator. In the transportation industry as in the subject case there are situations where one transporter takes the help of another transporter by way of sub-contracting the work. The other person bills the first transporter for sub-contracting service and the main transporter is the actual service receiver. It is generally seen that sub-contractor person is actually providing transportation service on behalf of the first transporter. As per the definition of GTA in the GST Laws it is very clear that person who issues consignment note will be treated as goods transport agency. In the subject case Principal GTA issues consignment note which is further stamped by its consignee on delivery of the goods and is therefore a GTA for this transaction. Any services by way of transportation of Goods by road other than through GTA would be exempt supply as per the entry of notification as quoted in the above paragraph. Hence the activity of the transportation of goods by the Applicant is not eligible for exemption under entry no. 18 of N/N. 12/2017-Central Tax (Rate) dated 28.06.2017. Conclusion - The applicant is desirous of opting the exemption available under entry no. 18 of N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 but this is merely by stretch of imagination on part of the applicant as the activity or service purported to be rendered is wholly outside the scope of this notification as the applicant s business activity is only rental services of transport vehicles. Rental services of transport vehicles is notified under notification no.11/2017-Central Tax (Rate) dated 28.06.2017. The activity of the transportation of goods by the Applicant will not be exempted under entry no. 18 of Notification no.12/2017-Central Tax (Rate) dated 28.06.2017.
Issues Presented and Considered
The core legal questions considered by the Authority for Advance Ruling (AAR) were:
Issue-wise Detailed Analysis 1. Definition and Qualification as Goods Transport Agency (GTA) Legal Framework and Precedents: The GST Act, through Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, defines a "goods transport agency" as any person who provides service in relation to transport of goods by road and issues a consignment note, by whatever name called. This definition is consistent with the erstwhile Service Tax regime under Section 65B(26) of the Finance Act, 1994, and Rule 4B of the Service Tax Rules, which prescribe the issuance and contents of a consignment note. The CESTAT Principal Bench ruling in Gunesh Logistics Vs. Commissioner of C.Ex. & Service Tax, Jaipur-I, emphasized the necessity of two conditions to qualify as GTA service: (i) transport of goods by road and (ii) issuance of consignment note by the GTA. The ruling further clarified that the transporter becomes the bailee of goods upon issuance of the consignment note, assuming responsibility and lien over the goods until delivery. Court's Interpretation and Reasoning: The AAR acknowledged that issuance of consignment note is a sine qua non for classification as GTA. The applicant submitted that it would issue consignment notes to the Principal GTA for each transport, thus assuming responsibility as a bailee. The applicant argued that the service provided is on a principal-to-principal basis, and hence qualifies as GTA service. Key Evidence and Findings: The applicant produced a draft agreement indicating that the Principal GTA enters into the main contract with consignors/consignees and issues consignment notes, while subcontracting the physical transportation to the applicant, who would also issue consignment notes to the Principal GTA. The applicant relied on the Karnataka AAR ruling in M/s Saravana Perumal, which held that issuance of consignment note and undertaking transportation for consideration qualifies a person as GTA. Application of Law to Facts: The AAR examined whether the applicant's issuance of consignment notes to the Principal GTA for the same transportation activity could satisfy the GTA definition. It noted that the term "Principal GTA" is not defined in the GST Act but is a label used by the applicant. The applicant's role was essentially subcontracted transportation, with the Principal GTA maintaining the contract with the consignor/consignee and issuing consignment notes to them. Treatment of Competing Arguments: The jurisdictional officer contended that the applicant's services fall under Heading 9966 (rental services of transport vehicles) rather than GTA services under Heading 9965. The officer relied on a Maharashtra Appellate Authority for Advance Ruling decision, which held that subcontractors without direct contracts with consignors/consignees and who do not issue consignment notes to them cannot be GTAs. Instead, their services are rental of vehicles. Conclusion: The AAR concluded that the applicant, acting as a subcontractor without a direct contract with consignors/consignees and not issuing consignment notes to them, cannot be considered a GTA. The issuance of a consignment note to the Principal GTA does not satisfy the statutory requirement, as only one consignment note per single movement of goods is allowed. 2. Applicability of Exemption under Entry No. 18 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 Legal Framework: Entry No. 18 of Notification No. 12/2017 exempts intra-State supply of services by way of transportation of goods by road except services provided by a GTA or a courier agency. The exemption applies to services classified under Heading 9965. Court's Interpretation and Reasoning: Since the applicant's services do not qualify as GTA services, the exemption under Entry No. 18 does not apply. The AAR emphasized that the applicant's activity is akin to renting transport vehicles to the Principal GTA, which holds the transportation contract with consignors/consignees and issues consignment notes. Key Evidence and Findings: The AAR noted that the Principal GTA issues consignment notes and e-way bills to consignors/consignees, indicating it alone holds the transportation contract. The applicant merely provides vehicles and undertakes transportation on behalf of the Principal GTA. Application of Law to Facts: The AAR applied the legal principle that exemption under Entry No. 18 is not available to persons who do not qualify as GTA. Since the applicant is effectively providing rental services of transport vehicles, their service falls under Heading 9966, which is not exempted under the said notification. Treatment of Competing Arguments: The applicant's contention that issuance of consignment notes to the Principal GTA qualifies them as GTA and hence eligible for exemption was rejected. The AAR held that a single consignment note per movement is mandatory, and subcontracted issuance of consignment notes does not satisfy the condition. Conclusion: The applicant's transportation service is not exempt under Entry No. 18 of Notification No. 12/2017. Instead, it is taxable as rental services of transport vehicles under Notification No. 11/2017-Central Tax (Rate). 3. Nature of the Applicant's Service - GTA Service or Rental of Transport Vehicles Legal Framework: Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 classifies rental services of transport vehicles under Heading 9966, which is taxable. The distinction between GTA services and rental services depends on contractual relationships and issuance of consignment notes. Court's Interpretation and Reasoning: The AAR observed that the applicant's role is limited to providing vehicles and performing transportation on call from the Principal GTA, who holds the contract with consignors/consignees. The applicant does not issue consignment notes to consignors/consignees, nor does it assume the lien on goods directly from them. Key Evidence and Findings: The draft agreement and operational model indicate that the applicant is subcontracted by the Principal GTA. The Principal GTA issues consignment notes and e-way bills, and the applicant bills the Principal GTA for vehicle usage. Application of Law to Facts: The AAR applied the legal definition of GTA and the requirement of consignment notes issuance to consignors/consignees to conclude that the applicant is not a GTA but a transporter providing rental services of vehicles. Treatment of Competing Arguments: The applicant's argument that they undertake transportation on a principal-to-principal basis and issue consignment notes to the Principal GTA was rejected on the ground that such issuance does not satisfy the statutory requirement of consignment note issuance to consignors/consignees. Conclusion: The applicant's service is classified as rental services of transport vehicles, taxable under Heading 9966, and not as GTA services. Significant Holdings "Issuance of consignment note is an essential condition for any person to act as GTA. If such a consignment note is not issued by the transporter, the service provider will not come within the ambit of GTA. If a consignment note is issued, it indicates that the lien on the goods has been transferred (to the transporter) and the transporter becomes responsible for the goods till its safe delivery to the consignee." "A single consignment note for a single movement of goods is a pre-requisite. Thus, issuance of consignment note to the consignor is an essential condition to qualify as a GTA. In case an entity only provides vehicles on rent or hire or other services for transport of goods for some consideration then it shall not be called a GTA." "The Principal GTA has a contract with the owner of goods (consignor) for the transportation of goods and it shall be the responsibility of the Principal GTA to uphold the contract (safe delivery of goods) and issue a consignment note for the same. The activity of the applicant shall be termed as 'renting of vehicles'. Merely owning trucks and renting them out for transportation of goods does not qualify in the definition of GTA." "The transaction in this case would be one of renting of vehicles and not that of a Goods Transport Operator." Core Principles Established:
Final Determinations on Each Issue:
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