Transport of Passengers

GST Update 30.08.2016

GST- Daily Dose of Updation

Transport of Passengers

Section 6(10) of the IGST Act, 2016 talks about the determination of place of supply of service in respect of transportation of passengers. It states as follows:
The place of supply of passenger transportation service to
(a) a registered person, shall be the location of such person;
(b) a person other than a registered person, shall be the place where the passenger embarks on the conveyance for a continuous journey:
Provided that where the right to passage is given for future use and the point of embarkation is not known at the time of issue of right to passage, the place of supply of such service shall be determined in the manner specified in sub-sections (2) or (3), as the case may be.
The earlier provisions earmarked the place where the passenger embarks on the conveyance for a continuous journey as the place of provision of service. This had the relevance and effect only in case of foreign travels where a passenger embarked from India to travel abroad. In case of in country travels, service tax was uniformly applicable as it was a central levy. But as evident, the new provisions have an additional provision added in respect of service recipient being registered under GST.
In case of registered service recipient, the location of supply will be the location of the recipient. Now let’s have a look at the effect on passenger transport industry. The Indian railways who work on such a wide level, has to keep tract of the location of the person booking tickets and its registration no. too. Same will be the case in respect of bus journey or let’s say any other medium of journey. In other case where the person is not registered, data of embarking of journey will also have to be tracked down to determine what tax has to be paid. This would increase the cost of compliance manifolds for the transport mediums, the burden of which anyhow will be shifted on the end users only.
Other major cause of concern is that the payment of tax rules state that if by mistake, CGST/SGST has been paid instead of IGST then the correct tax has to be paid and refund of the tax paid wrong has to be claimed. Thus in case of huge concerns like Railways, these provisions will prove to be cumbersome and very costly to comply.

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GST Update 30.08.2016

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