The government has extended the deadline for goods transport agencies to May 31 to exercise their option to pay GST on top of the current fiscal’s forward charge.

Under GST, goods transport agencies have the option to charge and pay GST on a forward charge basis. If they do not choose to do so, the tax liability is transferred to the service recipient under the reverse charge mechanism.

For opting to pay Goods and Services Tax (GST) on a forward charge basis at the rate of 12% (with input tax credit) and 5% (without ITC benefit) in a financial year, a goods transport agency (GTA) by March 15 of the previous financial year, fill up a form (Annexure V).

In an amendment to the GST Act, the Treasury said in May that “the option for the financial year 2023-2024 (by GTA) shall be exercised on or before May 31”.

Under the GST that took effect on July 1, 2017, any entity that provides road freight transportation services and issues a waybill is defined as a GTA.

The amendment further states that a GTA that starts a new business or exceeds the registration threshold in any financial year may exercise the option to pay itself for goods and Service Tax one month from the date of application for GST registration or from the date of obtaining registration, whichever is later.

Rajat Mohan, the senior partner at AMRG & Associates, said the GTA could tax forward or reverse charges, with both mechanisms having pros and cons.

Forward charge allows the taxpayer to use the tax credit and only pay tax on the differential gain. Mohan added that the reverse charge would remove the need to keep detailed records for tax payments and free up working capital blocked due to taxes.