How Can a GTA Opt for GST Payment on Forward Charge | Steps Explained | Due Date

The Goods and Services Tax Network (GSTN) recently released an advisory enabling Goods Transport Agencies (GTAs) to submit a declaration on the GST portal in Annexure V for paying tax under a forward charge basis. 

In this article, we explain the GST levy options available to GTAs, the rates of GST applicable, and the process to file Annexure V by GTAs opting to pay GST under the forward charge mechanism.

Latest updates

50th GST Council meeting   
In the 50th GST Council meeting held on 11th July 2023, the Council provided a relaxation for Goods Transport Agencies (GTAs) wishing to pay GST on a forward charge basis. GTAs will not be required to file a declaration for paying GST under forward charge every year. The option, once exercised for a particular financial year, will be deemed to have been exercised for future financial years unless a declaration is filed to revert that decision. 

Further, the deadline to exercise this option will now be 31st March of the preceding financial year instead of 15th March.
Note: These decisions will come into force once notified by the CBIC.

Forward Charge and Reverse Charge Mechanism for GTAs

Under the GST law, a Goods Transport Agency is defined as a person who provides a service in regard to the transport of goods by road and issues a consignment note or other similar document.

Goods Transport Agencies are given the option to collect and pay GST on a forward charge. If they do not opt to do so, the liability to collect and remit taxes gets automatically transferred to the recipient of services, also known as the reverse-charge mechanism (RCM). 

While both options have been available to GTAs under the law for some time, the same has been enabled on the GST portal only recently. This new amendment will be in line with Notification No. 03/2022-Central Tax (Rate) dated 13th July 2022.

The following flowchart displays the options available for GTAs and the applicable rates of GST-

Compliance by a GTA under Forward Charge Mechanism

The GST portal has recently released a new update stating that GTAs who wish to exercise the option to pay GST on the services supplied by it (i.e. the forward-charge mechanism) will be required to file a new form called Annexure V on the GST portal. 

The following is the format of Form Annexure V.

Where a GTA has opted to pay tax on a forward charge basis on the GST portal, then along with the tax invoice issued to the recipient of supplies, they must also issue a declaration as per the format in Annexure III as follows-

Deadline for a GTA to Opt for Forward Charge Mechanism

If a GTA wants to opt to pay GST on a forward charge basis for the upcoming financial year, then they are required to submit the Annexure V form on the GST portal by 15th March* of the preceding financial year. For example, for FY 2023-24, the deadline to opt to pay tax on forward charge basis is 15th March 2023*. 

For FY 2022-23, the deadline to exercise this option was 16th August 2022. The same had to be filed with the jurisdictional GST authority. However, the CBIC had allowed taxpayers to issue invoices from 18th July 2022 to 16th August 2022, before the option was exercised. This is provided the GTA opted to pay GST on forward charge on or before 16th August 2022. 18th July 2022 was the date that Notification No. 03/2022-Central Tax (Rate) came into effect. 

Once filed, the same cannot be withdrawn during the financial year. In simple words, the GTA who files Annexure V cannot switch back to RCM in between the financial year.

* 1. The CBIC extended the deadline for FY 23-24 to 31st May 2023. Moreover, taxpayers who crossed the registration threshold in between the financial year 23-24 can file Ann V within 45 days of GST registration application or one month from the date of getting registration certificate, whichever is later.

2. As per the decision taken in the 50th GST Council meeting held on 11th July 2023, the deadline to exercise this option will hereafter be 31st March of the preceding financial year instead of 15th March. This change is yet to be notified by the CBIC.

Step-by-Step Process to Opt for Forward Charge and File Annexure V

To opt to pay tax under forward charge, a GTA will need to follow these steps on the GST portal:

Step 1: Log in to the GST portal.

Step 2: Navigate to ‘Services’ -> ‘User Services’ -> ‘Opting Forward Charge Payment by GTA (Annexure V)’.

Step 3: A pop-up box opens on the screen, asking the user to confirm if they wish to opt to pay tax on a forward charge or return to the dashboard. Click on ‘Proceed’.

Step 4: Select the financial year and click on ‘Go’. 

Step 5: Proceed to select the checkboxes against the two declarations and click on the ‘Proceed to file’ button at the bottom of the Annexure V form to submit.

Impact of Opting to Pay GST on Forward Charge 

A GTA can opt to pay GST at 5% (without ITC) or 12% (with ITC) on their supplies. Some of the benefits of opting into the forward charge mechanism are:

• The GTA can be in control of their compliance and ensure that taxes are paid on their supplies.
• Opting into forward charge may have a positive impact on sales as the recipient of supplies is not burdened to calculate and pay the taxes. 
• The GTA is given two different GST rates to choose from. In cases where their vendor base is non-compliant, they can opt for the 5% GST rate so that they do not need to deal with the hassles of claiming ITC. 

Frequently Asked Questions

1. What is a GTA?

Ans: A GTA or Goods Transport Agency is a person who provides a service in relation to the transport of goods by road and issues a consignment note, by whatever name called.

The services provided by a GTA also include ancillary services provided such as-

• Packing/ unpacking
• Loading/unloading
• Trans-shipment
• Temporary warehousing, etc.

Provided the above services are included and not supplied as independent services.

2. What are the rates of GST applicable to a GTA?

Ans: A GTA can opt to pay tax on a forward-charge basis, where the GTA themselves pays tax on the services supplied by them. The rate of GST applicable is 5% (without input tax credit or 12% (with input tax credit).

Where a GTA does not opt to pay tax on a forward charge, the liability to pay GST automatically transfers to the recipient of service. The applicable rate of GST under reverse charge will be 5%.

3. Are services provided by a GTA exempt under the GST law?

Ans: The GST law exempts only the following services provided by a GTA by way of transport in a goods carriage- 

(a) Agricultural produce 

(b) Goods, where the consideration does not exceed Rs.1,500 for a single consignment

(c) Goods, where the consideration does not exceed Rs.750 for a single consignee (d) Milk, salt and food grains, including flour, pulses and rice 

(e) Organic manure 

(f) Newspapers or magazines registered with the Registrar of Newspapers 

(g) Relief materials that are meant for the victims of natural or man-made disasters, accidents, calamities, or mishaps 

(h) Defence or military equipment

All other services are charged at 5% or 12% GST.

4. When is the deadline for a GTA to opt to pay tax on forward charge?

Ans: 15th March* is the deadline for a GTA to opt to pay tax on a forward charge for the upcoming financial year. A declaration needs to be submitted for each financial year.

* The deadline is extended to 31st May 2023 for FY 2023-24. (or 45 days from GST registration application or one month from date of GST registration certification, whichever is later for newly registered GTA)

5. How would the recipient of supplies know when a GTA has opted to pay tax on a forward charge basis?

Ans: If a GTA is charging GST on a forward charge basis, the same would be indicated on the invoice that is issued. Further, the GTA must declare in Annexure III that they are registered under GST and paying tax on a forward charge basis. The invoice acts as evidence, and the recipient will not be required to pay tax under RCM.

6. Can a GTA choose to pay tax on a forward charge for a certain GSTIN?

Ans: For a GTA that operates in multiple states, the GTA is allowed to pay tax on a forward charge for a certain GSTIN only and pay tax under RCM for others.