All India Transporters Welfare Association

Imbalance in GTA Taxation Unde....

Air-conditioned Cabin Can Solve Drivers’ Crisis? In India’s Goods and Services Tax (GST) framework, Goods Transport Agency (GTA) servicesare subject to two taxation mechanisms—Forward Charge Mechanism (FCM) and ReverseCharge Mechanism (RCM). While this dual structure was designed to offer flexibility totransporters and service recipients, its real-world application has led to significant disparities,particularly in tax incidence, compliance obligations, and input tax credit (ITC) treatment.Under FCM, the GTA is responsible for charging and remitting GST. It can choose between twooptions: paying 5% GST without availing ITC or paying 12% GST with the benefit of ITC. Inthis case, the GTA must handle all aspects of GST compliance, including issuing tax invoices,maintaining records, and filing returns.In contrast, under RCM, the service recipient bears the responsibility of paying the GST, usuallyat 5%, and may claim ITC on that amount—effectively bringing the tax burden down to zero.This is particularly attractive for large, GST-compliant businesses, as it allows them to controlcompliance and reduce costs. A GTA that prefers to avoid handling GST directly can remainunder RCM, while the recipient pays the tax—2.5% each under the CGST and SGST Acts.The result is a clear market tilt in favor of RCM. Since ITC is disallowed under the 5% FCMoption, the tax cost remains embedded in the freight cost, making it more expensive forcustomers. Meanwhile, under RCM, recipients eligible fo....