Option provided to GTA to opt either for 5% (without ITC) or 12% (with ITC) under Forward charge



Earlier, the CBIC vide Notification No. 13/2017-Central Tax (Rate), dated June 28, 2017 (“Services RCM Notification”), to notify the categories of services on which tax will be payable under the Reverse Charge Mechanism (“RCM”).

Further, the GST Council’s 47th meeting was held in Chandigarh on June 28-29, 2022 under the chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman, wherein, recommendations were made to provide an option to Goods Transport Agency (“GTA”) to pay GST at 5% or 12% under forward charge option to be exercised at the beginning of Financial Year. RCM option to continue. Further, to withdraw the exemption on services of renting of residential dwelling to business entities; and to bring all the taxable service of Department of Posts under forward charge mechanism.

Accordingly, the recommendation has been notified vide following notification:


The CBIC vide Notification No. 05/2022-Central Tax (Rate) dated July 13, 2022 has issued amendments in Services RCM Notification, w.e.f. July 18, 2022, in a following manner:

  • Omitted the words “who has not paid central tax at the rate of 6%,” in SI. No 1 of the Services RCM Notification so as to provide an option to GTA to pay GST @ 5% (without ITC) or 12% under Forward charge
  • New proviso in SI. No. 1 of the Services RCM Notification, has been inserted to provide that No 1 of the Services RCM Notification (i.e., for GTA services) will not apply where the supplier has taken GST registration & has exercised the option to pay tax under forward charge mechanism and the supplier has issued a tax invoice to the recipient charging applicable tax and has made a declaration on such invoice issued.
  • Omitted the words “by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority” in SI. No. 5 of the Services RCM Notification, so as to bring such services under the forward charge mechanism.
  • New SI. No. 5AA has been inserted in the Services RCM Notification r.t. service by way of renting of residential dwelling to a registered person.
  • New Annexure III has been inserted in the Services RCM Notification w.r.t. declaration by the GTA, opting to pay tax on services in relation to transport of goods under forward charge mechanism for an entire Financial Year.

Our comments:

Currently, GTA who opt to pay GST @ 12% do not have the option to pay GST @ 5%. They have to pay GST at the rate of 12% on all their consignments under forward charge. GTA w.e.f. July 18, 2022 will be allowed to pay GST either at 5% (without ITC) or 12% (with ITC) on their consignments under forward charge.

Further, RCM can be opted only if GTA has not opted to pay under forward charge and the option to continue under RCM @ 5% rate will also continue. GTAs will be able to switch from one option to the other at the beginning of the financial year.

Accordingly, changes have been made in Notification No.11/2017- Central Tax (Rate), dated June 28, 2017 (“Services Rate Notification”) vide Notification No. 03/2022- Central Tax (Rate) dated July 13, 2022.

Similar notifications have been passed under Integrated Goods and Services Tax Act, 2017 (“the IGST Act”) and Union Territory Goods and Services Tax Act, 2017 (“the UTGST Act”).

CGST (Rate) Notification: https://taxinformation.cbic.gov.in/view-pdf/1009435/ENG/Notifications

IGST (Rate) Notification: https://taxinformation.cbic.gov.in/view-pdf/1009455/ENG/Notifications

UTGST (Rate) Notification: https://taxinformation.cbic.gov.in/view-pdf/1009452/ENG/Notifications

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