Suggestions on the draft amendments in GST Law in respect of Transport Industry filed before Finance Ministry

1 Concerned Issue/Practical Problem

Issue 1 (a):  Considering the Transport Industry is being unorganized and there are certain inadvertent errors which are being done by the transporters which are of the following kinds wherein the transporters are carrying the invoice and consignment note and Part B details are incorrect on account of the following situations (Bonafide Cases)

? Incorrect vehicle details in the Part – B of the E way Bill document while the invoice which the transporter is carrying is correct. The incorrect details may be on account of any of the following reasons

o   Non-updating the vehicle details while transferring the goods from one vehicle to another; and/or

o   Incorrect details which might be punching errors while submitting / updating the Part – B of the E way bills.

? Non-punching of vehicle details in Part – B while the invoice carries the correct details along with the consignment note which being issued by the transporter.

With the above kind of errors which are being imposed in respect of the procedural lapses, the GST law has not bifurcated into malafide default or Bonafide/ procedural default and imposed similar penalty in both the situations on the transporters.

In respect of the same, there are various Writ which were filed.

2 Relevant Provision in the GST law in respect of the above challenge

Section 129 Section-129(1)(b) CGST Act, 2017(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,––

(a) on payment of the applicable tax and penalty equal to one hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;

(b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty;

Proposed suggestions in respect of the concern/ query -1

Suggestion to issue no 1 (a):      

Suitable proviso can be inserted in section 129(1)

Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder , all such goods all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released,––

(a) on payment of the applicable tax and penalty equal to one hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;

(b) on payment of the applicable tax and penalty equal to the fifty per cent. of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent. of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty;

'Provided that wherein any transporter transports any goods or stores any goods while they are in transit while contravening part B of the Eway bill i.e. Transporter/Vehicle details are incorrect/ not filled by the transporter, then the penalty may be imposed upto the maximum of 25,000'.

2 Issue no -2 Exemption has been proposed in respect of the transportation service when provided to domestic customer when the shipment is going to overseas.

The proposed amendment provide a level playing field to the domestic transportation companies and promote export of goods, as if transportation of goods from a place in India to a place outside India by a transporter located in India would not be chargeable to GST, as place of supply will be outside India.

The changes proposed in the draft amendment shall make the

Presently similar exemption have been provided specifically in respect of the transit cargo to Nepal/Bhutan under exempted list of services Vide Notification no 31/2017- Integrated Tax ( Rate), Central government has amendment notification to 09/2017- IGST and inserted clause 10 B.

Under the said clause, supply of services associated with transit cargo to Nepal / Bhutan shall be exempted from the GST levy.

Effect of this transaction is reversal of input tax credit according to section 17(2) read with rule 42 of CGST Act, 2017.

Present relevant provision under the GST law as on date

The place of supply of services by way of transportation of goods, including by mail or courier to,––

(a) a registered person, shall be the location of such person;

(b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation:.

Draft Changes in the GST Law published not approved by council

'Provided that if the transportation of goods is to a place outside India, the place of supply shall be the place of destination of such goods'

3 Suggestion made to finance Ministry for the benefit of the Logistic company for non reversal of Input Tax Credit

Considering the logical rationale which is being provided in the draft suggestions that ‘proposed amendment provide a level playing field to the domestic transportation companies and promote export of goods, as if transportation of goods from a place in India to a place outside India by a transporter located in India would not be chargeable to GST, as place of supply will be outside India.”

However, such amendment has the effect of this transaction of corresponding reversal of input tax credit according to section 17(2) read with Rule 42 of CGST Act, 2017 which defeats the purpose of the draft amendment proposed.

To give the corresponding benefit for the input tax credit also it is proposed to include the said kind of service in Schedule –III to give the benefit of non-reversal of the Input Tax Credit.

Schedule -III

‘To include the service of transportation of goods, including by mail or courier to wherein location of the supplier and location of the recipient is in India however the place of detination of goods is outside India’ 

Please feel free to provide any suggestions/ comments.

Regards

Kapil Mahani

Leader Indirect Tax, India and UAE

[email protected]

9899616182

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