Arranging Vehicles for Profit? Don’t Get GST Wrong.

 

CA RAMAKRISHNA SANJAY

7760252581

If you are coordinating buses or cars for colleges, corporates etc (tours, camps, events) without owning vehicles, your GST treatment is not automatic.

It hinges on one critical question:

Are you an agent earning commission, or the main supplier billing the full value?

Get this wrong, and you may end up paying GST on the entire trip value instead of just your margin.

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🔍 Business Model – What You’re Actually Doing

You:

• Don’t own vehicles

• Connect colleges,corporates with vehicle owners

• Arrange trips on demand

👉 This can be structured in two legally distinct ways under GST.

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🔹 Model 1: Commission / Agent Model (Lean & Efficient)

📌 When this applies:

• Vehicle owner bills the college directly only the commission part

• You earn a commission for facilitation

💰 GST Treatment:

• GST applicable only on commission

• Rate: 18%

⚖️ Legal Backing:

• Section 7, CGST Act, 2017 → Defines “supply” (your service = facilitation service)

• Section 2(13), IGST Act → Defines intermediary (arranges supply between two parties)

• Rule 33, CGST Rules → Pure agent concept (if conditions are satisfied, value exclusion possible)

✅ Why this is powerful:

• Lower GST outflow

• Cleaner margin-based taxation

• Minimal working capital blockage

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🔹 Model 2: Principal Model (Full Billing )

📌 When this applies:

• You raise invoice to college for full trip amount

• You pay vehicle owners separately

👉 You are now treated as the main supplier of transport service

💰 GST Treatment:

• GST on entire billing value

📊 Applicable Rates:

• 5% (without ITC) – common for passenger transport

• 12% (with ITC) – if opting for input credit

⚖️ Legal Backing:

• Section 2(105), CGST Act → Supplier definition

• Section 2(30), CGST Act → Composite supply

• Notification No. 11/2017 – Central Tax (Rate) → Passenger transport GST rates

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⚠️ Reality Check – What Department Looks At

GST authorities don’t rely on what you “call yourself.” They evaluate actual conduct:

If you:

• Collect full payment

• Issue invoice in your name

• Decide pricing

👉 You are NOT an agent, you are the principal supplier

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📌 Documentation is the Game Changer

To defend your position, maintain:

• Clear agreement (agent vs principal)

• Proper invoice structure

• Defined flow of money

Without this, even a genuine agent model can be reclassified and taxed fully

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🎯 Bottom Line

• Agent model → GST @ 18% on commission only

• Principal model → GST on full value (5% / 12%)

👉 Structuring decides taxation — not intention.

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