GST regime starts
From 1st of July 2017, the new GST regime had started. Finance minister Arun Jaitley declared that there would be slabs of 5%, 12%, 18%, 28%. Basic tax rate would be 18%, meaning most of the normal goods which are not to be subsidized or luxury items which would attract a rate of 28%, would Attract 18% tax. Movers and Packers logically came under this standard GST rate.
Customer Complain on Tax rate of Movers and Packers under the new GST Regime
There is a misconception about the movers and packers rate under GST. In public media forums like Quora you will frequently see customers grumbling about being fleeced with higher GST rates. They complain that although the GST rate for movers and packers is a mere 5%, but many times, they are charged 18%. However, nothing can be further from truth.
What is the truth then?
What the customers do not mention is that they opted for the total service of movers and packers.
By total service, we mean uploading the goods in transport vehicles from the target and then downloading and arranging them at the proper destination. This will need labor, packing the goods at one point, transporting them to another point, where they have to be unloaded. When the customer says that he has used the services of a movers and packers company, obviously he means that the total shifting including picking up and dropping the goods that have been done by them. And GST schedule for packers and movers unambiguously state that whenever household, office or any type of shifting will consist of separate handling, packing and unpacking of the goods by the consignee company, it will hereby attract a GST at a flat rate of 18%. 5 % is applicable only when the transport of the logistics company is solely used.
Where can you find the GST rates for movers and packers?
I personally like the website GST4U.in. It allows you the facility of inputting a search word for finding the code and do not bind you to pre-know exact code of the industry for finding its GST rate. In the primary description field, enter the string “road transport”. You will find three entries coming under transport .Now choose the code, which contains the following terms “household and office furniture”. By this term, you will instantly recognize that this item is meant for movers and packers. Other terms in the description, e.g. “parcels by trucks, trailers” will confirm your choice.
Notice the last part of the description for this specific transport item will have the term “transport parcels by trucks, trailers, man or animal drawn vehicles”. This term is specifically meant for household items which is used for the last mile transport in narrow avenues or gallis , which may not allow the entry of trucks or trailers.
Actual Circular for the GST rate of Movers and Packers
Now go to the accompanying circular of the finance ministry, which defines the rate of GST. The circular serial number is “Notification No. 11/2017-Central Tax (Rates)” dated 28.06.17. Annexure to notification bears No. 11/2017 –Central tax (Rates) dated 28.06.17.
When you check this circular, under Serial No. 9 & Heading 9965 (Goods Transport Services) go to column –“Description of service”. In this column under row (iii), you will find the description entry as “Service of Goods Transport Agency (GTA)” in relation to household goods for personal use. Alongside, you will find the relevant GST rate. Only those issuing a consignment note are considered as a GTA. Thus, a consignment note is an essential condition to be considered as a GTA under GST.
Relevant Enrollment Code in GST for Movers & Packers
While discussing this, let us have a small primer on what does SAC mean. After all, you have to enroll yourself for providing any particular service by choosing its relevant SAC. For example, to be enrolled as Movers and Packers, you have to enroll yourself under SAC 9965. SAC is the unified code used in GST for identifying a service, giving it a certain dimension and defining its tax structure.
Please note that business with turnover between 1.5 crore and 5 crores will have to obtain a two-digit SAC. Businesses having a turnover equal to and over 5 crores will require a SAC of 4 digits.
Government has a nice surprise
In the regard of GST for transport companies, we must not forget the convenience of input credit that is available to these companies. Input Credit in GST regime means the right to deduct the tax paid during buying the inventory required for running the business, while paying the tax for the business output. This facility of input credit deduction for the movers and packers goes a long way to reduce their actual tax outlay near 12 %.
Even if the customer opts for insurance, another important plus point to be noted for packers in GST regime is that the GST rate remains at 18%.
Are you moving via GST registered business?
To ensure that you are choosing a GST registered transporter, cross check his GST number. Just like VAT used previously, the company you choose should have a valid GST number. Any movers and packers company having a valid GST number will confidently give you a quote on their services.
Caution –Is the rate you are paying as taxes to the movers & packers reaching government coffers?
- To ensure that whatever you are paying in bill as GST charges will actually be deposited in the treasury, check out the bill structure. When you are paying GST at 18%, your bill should show the packing and unpacking as a segregated item. If the bill only shows only the transportation, he will most probably pay 5% tax while you have pre-imbursed him 18%. In case of 5% tax shown by the movers and packers company, he will not have the facility of input credit.
- If the movers and packers company shows your household shifting as “cargo movement”, get alerted band do not pay 18% tax. Cargo handling means only transportation, does not need packing and unpacking and hence attracts 5% tax only.
- Go for packer firms where you have the facility to fill the online forms for getting an online quote first. You can query about the GST rate if you feel any discrepancy once you get the online quotation. It will save you heartburn later when you find yourself being charged 18% rate off GST while you find no clear distinction between transportation and packing of goods in your bill.