Library / Goods and Services Tax: The Professional's Master Guide
55. Case Study 11: Transport Operator Choosing the GTA Option
55.1 Facts
Shivam Roadlines, Morbi, Gujarat, is a goods transport agency issuing consignment notes. For FY 2027-28 it must decide, by 31 March 2027, whether to stay at 5% without ITC or opt for 18% with ITC. Its expected figures:
Item | Amount (Rs.) | GST on it (Rs.) |
|---|---|---|
Freight from large manufacturers (profile A) | 2,10,00,000 | |
Freight from small composition traders (profile B) | 90,00,000 | |
Diesel | 1,20,00,000 | Outside GST |
Driver wages | 45,00,000 | Nil |
Tolls | 15,00,000 | Nil |
Repairs and spares | 30,00,000 | 5,40,000 |
Tyres | 12,00,000 | 2,16,000 |
Vehicle insurance | 6,00,000 | 1,08,000 |
Office and software | 5,00,000 | 90,000 |
New trucks (depreciation 15%) | 80,00,000 | 14,40,000 |
55.2 Issues
- The two rate options after GST 2.0 and who pays the tax.
- Effect on each customer profile.
- Margin comparison and the timing of the declaration.
55.3 Analysis and computation
After 22 September 2025 a GTA has two options. At 5%, no credit of tax on inputs is allowed; tax is paid by the recipient under reverse charge where the recipient is a factory, society, co-operative society, registered person, body corporate, firm or registered casual taxable person, or by the GTA itself if it opts for forward charge. At 18%, the GTA pays under forward charge and takes full credit. The earlier 12% option is gone. The chosen option applies to all GTA services of that year; it cannot be picked customer by customer. Trucks used for transport of goods are outside the motor vehicle block in section 17(5)(a).
Customer, freight Rs. 1,00,000 | 5% option | 18% option |
|---|---|---|
Profile A (full credit) | Pays 5,000 under RCM, takes credit: net 1,00,000 | Pays 1,18,000, takes 18,000 credit: net 1,00,000 |
Profile B (composition, no credit) | Pays 5,000 under RCM: cost 1,05,000 | Pays 1,18,000: cost 1,18,000 |
Profile A does not care. Profile B pays Rs. 13,000 more per lakh under the 18% option and is likely to shift to another transporter unless Shivam cuts its rate.
Illustration 223: Margin comparison for FY 2027-28 Step 1: 5% option. GST on repairs, tyres, insurance and office (Rs. 9,54,000) is a cost. Running cost = Rs. 2,42,54,000. Trucks capitalised with GST at Rs. 94,40,000; depreciation Rs. 14,16,000. Margin = 3,00,00,000 less 2,42,54,000 less 14,16,000 = Rs. 43,30,000. Step 2: 18% option, same freight rates. Running cost without GST = Rs. 2,33,00,000; depreciation on 80,00,000 = Rs. 12,00,000. Margin = Rs. 55,00,000. Step 3: 18% option with profile B protected. To keep B's all-in cost the same, B's freight must fall to 90,00,000 x 105 / 118 = Rs. 80,08,475, a loss of Rs. 9,91,525. Margin = Rs. 45,08,475. Step 4: Even after protecting profile B, the 18% option earns Rs. 1,78,475 more. The first-year cash benefit is larger because the truck credit of Rs. 14,40,000 is recovered at once, not over the depreciation period. |
The answer would change if profile B were most of the business, or if Shivam bought no trucks in the year. A GTA with an old fleet and mainly unregistered or composition customers may do better at 5%.
55.4 Compliance and documentation
- Declaration in Annexure V on the portal between 1 January and 31 March of the preceding year to pay under forward charge. It continues for later years until Annexure VI is filed in the same window to go back.
- A GTA starting business or taking registration during the year has a short window after registration; check the notification.
- GTAs are outside e-invoicing; the consignment note and tax invoice remain the documents.
- Before switching back to 5%, work out whether credit on trucks still in use must be reversed. The law is not explicit and practice varies; take a considered position and record it.
Key point Lessons The choice is a customer-mix question: the 18% option costs only those customers who cannot take credit. The declaration window closes on 31 March. Miss it and the business is locked into 5% for the year. Model margin with realistic price responses from customers, not just with credit gained. |
Chapter summary • GTAs now choose between 5% without ITC and 18% with ITC; 12% has gone. • Customers with full credit are indifferent; composition and unregistered customers prefer 5%. • For Shivam, 18% gives a margin of Rs. 45,08,475 even after protecting profile B, against Rs. 43,30,000 at 5%. • Forward charge is chosen through Annexure V between 1 January and 31 March. |
© Vipin Nair. This guide is for reading online only. Copying, downloading, printing and redistribution are not permitted. For study and general reference; not legal, tax or investment advice.