Pranav B Prem

The Gujarat Authority for Advance Ruling (AAR) has held that Goods and Services Tax (GST) at the rate of 5% is applicable for transportation of empty containers by rail, but without the benefit of Input Tax Credit (ITC). The ruling brings clarity to an industry-wide confusion in which rail operators have been charging different tax rates for the same activity. The Authority concluded that empty containers fall within the ambit of “goods” and therefore the service supplied is covered under entry (i) of Serial No. 9 of Notification No. 11/2017–Central Tax (Rate), relating to transport of goods by rail, attracting 5% GST.

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The application was filed by a container-train operator licensed to transport goods using rail wagons. It transported empty containers as part of routine industry practice, and sought an advance ruling on whether transportation of empty containers by rail should be taxed at 5% or 12%, since different rail operators charged different rates. The applicant maintained that containers are “goods”, and therefore transportation of empty containers is liable to GST at 5%, with clause (i) of Serial No. 9 being applicable.

The AAR examined the competing clauses—entry (i) and entry (iv) of Serial No. 9 of the Rate Notification. Entry (iv) applies to goods transported in containers by persons other than Indian Railways, and therefore the Authority observed that the provision was intended only for containerised cargo transport by non-rail operators. Since Indian Railways was not excluded in the applicant’s case and no specific entry covered transportation of empty containers, the AAR held that the residual clause (i), which covers transport of goods by rail, governs the present case. Reference was also made to Service Tax Circular No. 96/07/2007-ST (dated 23.08.2007), wherein empty containers were treated as “goods”, enabling the Authority to infer consistency between the pre-GST regime and the CGST Act, 2017.

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Further deliberating on the effect of residual entry (vii) of Serial No. 9, the AAR clarified that the residuary classification applies only to services other than those provided by rail, vessel, GTA, pipeline, ropeways, or multimodal transport. Since rail transport was specifically involved, there was no scope to invoke the residuary entry. The Authority underscored that the notification must be applied based on its “clear, plain and unambiguous language”, ruling out interpretative expansion of entry (iv) to include transportation of empty containers.

On tax credit, the AAR held that although GST at 5% applies to the service, ITC cannot be availed on input goods or services used for providing such rail transportation. The bar on ITC flows from Explanation IV appended to Notification No. 11/2017–CTR, which makes non-availability of ITC a condition for applicability of the concessional 5% rate. Therefore, opting for 5% GST mandates mandatory forfeiture of ITC.

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Holding that the applicant’s service falls squarely under entry (i) at Serial No. 9—Transport of goods by rail (other than services specified in item no. (iv))—the Gujarat AAR concluded that GST is payable at the rate of 5% without ITC on transportation of empty containers by rail.

Applicant's Name: M/s Hasti Petro Chemical & Shipping Limited