Advisory on GST Rate Change for GTA Services

 Advisory on GST Rate Change for GTA Services

The GST Council’s recent decision to increase GST on GTA services from 12% to 18% (under FCM) has triggered important discussions across industries. Key Impacts & Shifts: 🔹 Working Capital Pressure Under Forward Charge Mechanism (FCM), customers face fund blockage, since they pay higher tax to GTA without having corresponding GST liability. 🔹 Shift Towards Reverse Charge Mechanism (RCM) To manage liquidity, businesses are preferring RCM, where GST is payable at 5% while filing returns and input tax credit is available. This not only reduces fund lockage but also improves cash flow management. 🔹 Compliance Workload – Reduced in RCM Under RCM, the burden of invoice matching, ITC reconciliation, and mismatch risks is significantly reduced. Businesses gain more clarity and control over compliance, lowering operational risks. Legal Considerations: ⚠️ Once opted, FCM or RCM cannot be altered mid-financial year. ⚠️ GTAs shifting to RCM cannot claim ITC on their own tax-paid invoices, which may increase their operational cost. Advisory Note: Businesses should review their contracts and tax positions before restructuring their arrangements. GTAs must carefully weigh the long-term impact of remaining in FCM vs. moving to RCM. Professional consultation is recommended to align business strategy with compliance requirements. 💡 This rate change highlights how tax policy directly affects liquidity, compliance, and supply chain decisions — making proactive planning essential.

Comments

Post a Comment

Popular posts from this blog

Key Highlights of Section 194T:

Key Highlights of Section 194T: ✅ Effective from: April 1, 2025 ✅ Who needs to deduct TDS? Firms & LLPs ✅ Threshold Limit: ₹20,000 per financial year (Aggregate) ✅ TDS Rate: 10% (20% if PAN/Aadhaar not provided) ✅ Applicable on both working & non-working partners ✅ No exemption via Form 15G/15H or lower TDS certificate 🔹 Why is this important? Earlier, no TDS was required on such payments due to Section 40(b), but from April 1, 2025, firms/LLPs must deduct TDS before crediting or paying these amounts. This is a significant change impacting partnership firms, LLPs, and their partners. Firms must now ensure TDS compliance to avoid disallowance under Section 40(a).
Read more

My CA Journey summary

  Chartered Accountancy (CA)  is one of the most popular   professional courses . It is one of the Toughest courses in the world. It requires an integration of intelligence, hard work , Patience, Determination and continuous dedication with non-stop efforts.  Many aspirants relinquish this challenging journey and replace their dreams with  some other career options . My CA journey mentioned  below in  short summary: If I can become a Chartered Accountant anyone CAN. I Came from a village background with Telugu medium upto graduation. After graduating, I was confused as to what I should do. My Big Brother wanted me to pursue CA so that I have a degree, which would help me get a basic job and the required financial support in the future. That is when I decided to study further and become a Chartered Accountant. Initial period of my CA journey I was faced with a little bit of a medium issue, however I was able to clear the 1st 2 stages of CA early by spen...
Read more

GST on Corporate Guarantee

GST on Corporate Guarantee : one company (let’s say Company H) provided a corporate guarantee to a Bank or Financial institutions on behalf of its related entity, Company S . Since Company H and Company S are related persons under GST law, the question arises: ➡ Is a Corporate Guarantee taxable under GST? ➡ If yes, on what value should it be taxed, considering it is provided free of cost? Analysis As per Section 7(1)(c) read with Para 3 of Schedule I of the CGST Act, 2017, any supply of goods or services between related persons or distinct persons, made in the course or furtherance of business, is deemed a supply even without consideration. Further, Rule 28(2) of the Valuation Rules, 2017, provides that the value of a Corporate Guarantee shall be determined as: ✅ 1% per annum of the guaranteed amount (irrespective of whether the loan is partly or fully utilized) OR ✅ Actual consideration charged (if any) Whichever is higher However, as per the proviso under Rule 28, if the recip...
Read more