Admissibility of ITC on GST-GTA service on refrigerated vehicles returning empty

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The Gujarat Authority of Advance Ruling (AAR) has ruled that the Input Tax Credit (ITC) is admissible on GST paid on goods transport agency (GTA) service supplied to it, despite refrigerated vehicles travelling empty during the return journey.

The applicant, Vadilal, is in the business of supplying ice-cream in various states in addition to the supplies in Gujarat State. 

For transporting the goods to places located in different states, Vadilal has been using refrigerated vehicles because the goods have to be stored and preserved at a particular temperature to avoid deterioration in quality.

In this regard, various independent agencies, which are owners of refrigerated vehicles, have been providing refrigerated vehicles to Vadilal for transportation of its goods thus providing Supply of Transportation of Goods by road ( GTA) Services.

So, after delivering the goods at the destination, the refrigerated vehicle returns back.

During the return journey, ordinarily, the vehicle travels empty.

While be it so, the plastic trays in which Vadila transported and delivered the goods at the destination, on the other hand, may be lying empty at the location.

These empty plastic trays are brought back in the refrigerated vehicle during its return journey.

The applicant has sought an advance ruling on the issue of 

Whether the applicant ( Vadilal)  can avail input tax credit for the entire amount of GST paid on the transaction of the applicant's goods in refrigerated vehicles, to & fro, although the vehicles travel empty during the return journey ?

The AAR observed that the GST liability for supply of service by a GTA in respect of transportation of goods by road to a registered person shall be paid by the recipient of services.

The applicant is liable to GST under Reverse Charge Mechanism (RCM) for the GTA service supplied to it.

The Reverse Charge Mechanism as one may be aware,  is the process of where the liability for payment of GST is by the receiver instead of the supplier. 

The AAR held that ITC is admissible to the applicant (Vadilal) on GST paid on GTA service supplied to it.

Well.....

Candidly,  in my opinion, despite the fact that refrigerated vehicles travelled empty during the return journey, as the applicant (Vadilal) had paid an agreed freight to the GTA for its service (to & fro) and this agreed freight was inclusive of both the onward and return journey, the GST paid on the entire freight onward & return on RCM basis should be eligible.

Justified decision otherwise would have been an objection leading to protracted litigation.

SRIVATSAN.R.

MEPZ-SEZ, Chennai.

 PS :-

Applicant's Name: M/s. Vadilal Enterprises Ltd.

Citation: GUJ/GAAR/R/2022/35

Dated: 07.06.2022

Authority:- AAR, Gujarat.


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