No GST on Balance Freight Amount Deposited by Shippers to Carriers’ Escrow Accounts: AAR [Read Order]

The Tamil NaduAuthority for Advance Ruling (AAR) recently held that no Goods and Services Tax(GST) may be applicable on balance freight amounts deposited by shippers into a current escrow account before it is subsequently transferred to that of the carriers without any deductions.

The applicant, B2B Trucks Private Limited, operates an online portal that facilitates connections between shippers and carriers located across India. The company does not undertake the actual movement of goods but acts as a digital facilitator between both parties.

Under its business model, shippers pay the major portion of freight directly to the carrier and deposit the remaining balance into the applicant’s current account, which is later transferred in full to the carrier’s account once the delivery is completed. The applicant neither retains nor deducts any part of this balance amount and already pays GST on subscription fees collected from shippers and carriers for use of the platform.

The applicant approached the Authority seeking clarity on whether GST is leviable on the balance freight amounts temporarily held before being transferred to the carriers.

A Bench of C. Thiyagarajan (CGST Member) and B. Suseel Kumar (SGST Member) observed that the balance freight amount received by the applicant from shippers represents funds that is payable to the carriers and not consideration for any supply made by the applicant.

Since the applicant merely facilitated the transfer of funds without rendering a separate taxable service in this process, the AAR found that GST is not attracted on such transactions.

The Authority held that once it is determined that the freight amount deposited with the applicant does not constitute a ‘consideration’ to the applicant and once it is established that there is no supply of goods or services or both, then the applicant cannot be held liable to pay taxes under GST on the deposit amount which does not belong to them, and is meant to be forwarded to the accounts of carriers without any deduction.

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