Logistics Operator Can Charge GST At 5% For Transporting Empty Containers By Rail, ITC Inadmissible: Gujarat AAR

The Gujarat AAR comprising Mr. Vishal Malani (Member- Central Tax) and Ms. Sushma Vora (Member- State Tax) examined the two competing entries (i) and (iv) at Serial No. 9 of Rate Notification No. 11/2017- Central Tax (Rate) noted that there is not specific entry for transportation service of empty containers. Thus, the Gujarat AAR held that since there is no specific entry for transportation of empty containers then it would be covered by the general entry (i) at Serial No. 09 of Rate Notification.

Applicant, a Container Train Operator License holder for providing transportations services of goods in containers by rail facilitated transport of empty containers. As per industry practises, different rates of tax are charged by different rail operators, like Container Corporation of India, CONCOR for transporting empty cargo containers charges 5% GST while some other operators go for 12% GST.

Thus, the Applicant sought advance ruling on what was the GST rate applicable for transportation of empty containers by rail. It took a view that containers get covered by definition of 'goods' and rate prescribed at clause (i) of Entry 9 of Notification No. 11/2017- CTR which prescribed a rate of 5% (2.5% CGST + 2.5% SGST) would apply.

The Gujarat AAR from Service Tax Circular No. 96/07/2007- ST dated August 23, 2007 inferred that just as the erstwhile regime which considered 'empty containers' as goods, they are to be treated as 'goods' under CGST Act too. To comprehend this aspect, the AAR juxtaposed definition of 'goods' in terms of Section 65 (50) of the Finance Act, 1994 against Section 2(52) of the CGST Act, 2017. Further, the AAR deliberated on residuary entry (vii) at Serial No. 09 of the Rate Notification to state that the entry deals with those services other than the services provided using Rail, Vessel, GTA, Pipeline, Ropeways or multimodal transport and therefore, residuary entry will not include transport of goods by rail.

Thus, applying 'clear, plain and unambiguous' language of the Rate Notification, the AAR ruled out any scope of interpretation of its clauses. It was observed that Clause (iv) at Serial No. 09 was only intended for goods transported in containers by persons other than Indian Railways.

“There is no scope for an intendment that it would also include the transportation of empty containers”

Accordingly, the AAR clarified that Applicant would have to mandatorily forego its ITC as GST was payable at the rate of 5%, as mentioned in Explanation IV of Rate Notification.

Case Detail: Hasti Petro Chemical & Shipping Limited

For Applicant: Mr. Pradeep Jain (Chartered Accountant) and Mr. Arvind Swamy (Authorised Representative)

Click here to read the AAR order.