Gujarat Advance Ruling Authority Clarifies 5% GST Rate on Transportation of Empty Containers by Rail

M/s. Hasti Petro Chemical & Shipping Limited Secures Ruling on GST Rate, Forfeiting Input Tax Credit

In a significant decision, the Gujarat Authority for Advance Rulings (AAR) has ruled that the transportation of empty containers by rail is subject to a 5% Goods and Services Tax (GST) rate. This decision comes as a relief to M/s. Hasti Petro Chemical & Shipping Limited, who sought clarity on the applicable GST rate for such services under the GST regime.

The ruling, delivered by a bench consisting of Sushma Vora, Member (SGST), and Vishal Malani, Member (CGST), was in response to an application filed by the company, which operates as a Container Train Operator on the Indian Railway Network. The company had been charging a 12% GST rate on both loaded and empty container transports, based on Entry No. 9(iv) of Notification No. 11/2017-CT(R) dated 28.06.2017. However, certain customers contended that the correct rate for empty container transport should be 5%, as per Entry No. 9(i) of the same notification.

The AAR's analysis focused on distinguishing between the transportation of goods in containers, which falls under Clause (iv), and the transportation of empty containers. It was clarified that empty containers qualify as "goods" under Section 2(52) of the CGST Act. Therefore, the transportation of empty containers by rail falls under Clause (i), which prescribes a 5% GST rate, provided that the taxpayer foregoes the Input Tax Credit (ITC) associated with the service.

The ruling emphasized that Clause (iv) specifically applies to the transportation of goods in containers by any person other than Indian Railways, whereas Clause (i) serves as a general provision for all other rail transport services not specified under Clause (iv). The decision underscores the importance of the legislative intent to separate the tax treatment of services provided by Indian Railways and those by other operators.

In its ruling, the AAR also addressed the conditions under which the 5% GST rate applies. It stipulated that the credit of input tax charged in respect of goods or services used in supplying the service must not be utilized for paying central or integrated tax on the service's supply.

This clarification is expected to streamline industry practices, which had been inconsistent, with some operators charging differing rates. The decision could impact the operational costs for companies transporting empty containers by rail and influence broader logistics and supply chain strategies.

Bottom Line:

GST rate applicable for transportation of empty containers by rail is determined under Clause (i) of Sr. No. 9 of Notification No. 11/2017-CT(R) dated 28.06.2017, with a rate of 5%. Taxpayer must forego Input Tax Credit (ITC) for availing this rate.

Statutory provision(s): Section 2(52) of the CGST Act, Notification No. 11/2017-CT(R) dated 28.06.2017, Clause (i) and Clause (iv) of Sr. No. 9

M/s. Hasti Petro Chemical & Shipping Limited, (AAR)(Gujarat) : Law Finder Doc Id # 2819742