GST Implication On packers and Movers

XYZ Ltd. is introducing a new business segment as Packers and movers services under which it will provide relocation services or shifting of household goods of customers to their new residence. Such services will be provided as a complete package which will include packing, loading, transportation and unloading of goods safely to the destination and Locon will undertake all the risks related to damage during transit of goods. Further, the company will engage some third party packers and movers service supplier, through which it will execute this transaction.

TAX

December , 2022

India

Overview Projects

Now let us understand what will be GST implications on such service:

Legal Background:

Government clarified that packers and movers fall under cargo handling services

In the year 2008 when Service Tax was applicable, Government, through its circular vide M.F. (D.R.) letter D.O. F.No.334/1/2008-TRU dated 29/2/2008 on Cargo Handling Services has clarified that the –

1. Cargo handling service does not cover mere transportation of goods. Mere transportation of goods by road is covered under ‘Goods transport agency service”. Service providers, commonly known as packers and movers provide services of packing together with transportation, with or without other services like unpacking, loading, unloading etc. Such composite services, at present, are classifiable under cargo handling service or goods transport agency service depending upon their essential or predominant character of the services provided.

2. Section 65(23) which defines cargo handling service is being amended so as to include services of packing together with transportation of cargo or goods, with or without one or more other services like loading, unloading, unpacking, under cargo handling service. With this amendment, packing with transportation will be classifiable under cargo handling service only.

As per above circular, SAC 996719 may be used for all the services from Transportation to Packing/Unpacking, Loading/Unloading, etc.

Also, as per the explanatory notes on classification of services, the SAC code 996719 includes the following services:

996719 Other cargo and baggage handling services: This service code includes cargo handling services for non-containerized freight; services of freight terminal facilities, for all modes of transport, including stevedoring services (i.e. loading, unloading and discharging of vessels’ noncontainerized freight, at ports); cargo handling services incidental to freight transport not elsewhere classified; baggage handling services at airports and at bus, rail or highway vehicle terminals.

Thus, from above circular and explanatory notes it can be interpreted that the services of Packers and movers are taxable under GST and such services are taxable @ 18%.

How to determine place of supply?

After determining that the services are taxable at 18%, another important question is how to determine place of supply of such services. Thus, Section 12 provides the manner of determination of place of supply of services where both supplier and recipient are within India. Further, as the service of packers and movers doesn’t fall under any specific category of services, hence general rule of place of supply will apply, which is as follows:

General Rule

Section	Particulars	Place of Supply
12(2)(a)	Where supply of services made to registered person	Location of recipient of service
12(2) (b)(i)	Where supply is made to an unregistered person where address is available on record.	Place of where address is available on record
12(2) (b)(ii)	Where supply is made to an unregistered person where address is not available on record.	Location of the supplier

Hence, the place of supply will determine the applicable taxes i.e. CGST/SGST/IGST to be discharged basis of Address shared by the customer.

Eligibility of ITC on services received from third party

As our services are taxable at 18%, hence we are eligible for the entire ITC but it also depends on the third party which we are engaging for execution of the services, as if that third party vendor qualifies as GTA, then it may be possible that we have to discharge the RCM liability under GST @ 5% on such vendor’s services and it may result in additional cash burden on the company. However, we can avail the ITC of tax deposited under RCM.

Thus, to summarize the above view, there could be two situations as mentioned below:

Third Party vendor doesn’t qualify as GTA:

Then, such vendor will charge us GST at 18%, and we will be eligible for the entire ITC.

Third Party vendor qualify as GTA:

Then it may charge GST @ 12%, and we will be eligible for the entire ITC.

It may not charge GST and the company has to deposit GST @ 5% under RCM, and later it can avail ITC.

Taxability of services provided separately and not as a package

Loading & Unloading services: These services are classifiable under 996749 i.e. Other supporting services for road transport n.e.c. and taxable @ 18%.
Packing services: These services are classifiable under 998549 i.e. Other packaging services n.e.c. and taxable @ 18%.
Transportation services:

The classification of this service can be debatable, as such service can be classified as GTA services also, and in such case, the company may have to lose its common ITC proportionate to turnover of GTA services, then it would be separate service and have to test separately GST compliances

So, it would be advisable to not to render these services separately to save from additional compliances.

Conclusion

To conclude from GST perspective. the services of Packers and movers is taxable @18% and is classified as Cargo Handling services under SAC 996719, and hence is eligible for entire ITC related to expenses incurred to provide such services.

Did you like this Work? Please Share

Still Confused About Our Features? Get A Consultation

Get personalized consultation from our experts to clear any confusion and discover the full potential of our features.