NO GST ON FREIGHT PASSED THROUGH E-COMMERCE PORTAL TO CARRIERS
ISSUE
Whether an e-commerce operator (online portal connecting shippers and carriers) is liable to pay GST on the “balance freight” amount deposited by shippers into its account for onward remittance to carriers, specifically when the operator already pays GST on its commission/subscription fees and retains no markup on the freight amount.
FACTS
Business Model: The applicant operates a GST-registered online portal that connects shippers with transporters (carriers). The applicant does not assume responsibility for the actual movement of goods.
Revenue Stream: The applicant charges a commission or subscription fee to shippers and carriers, on which it duly pays GST.
The Transaction: Under the agreed model:
Shippers pay the major portion of the freight directly to the carriers.
Shippers deposit the balance freight into the applicant’s separate current account.
The applicant releases this balance in full to the carriers upon receiving Proof of Delivery (POD).
No Mark-up: The applicant does not charge any fee, mark-up, or deduction on this balance freight; it acts merely as a conduit.
The Doubt: The applicant sought an advance ruling on whether this “balance freight” held and transferred by them attracts GST liability in their hands.
DECISION
Not ‘Consideration’ for Applicant: The ruling clarified that “Consideration” (Section 2(31)) must be for a supply. The freight charges are the consideration for the transportation service provided by the Carrier to the Shipper. The money routed through the portal is not consideration for the portal’s service.
Nature of Deposit: Even if the amount is treated as a deposit, the proviso to Section 2(31) states that a deposit is not consideration unless it is applied as such. Here, the applicant merely holds the funds and transfers them as directed; they do not appropriate it for their own service.
No Supply of Goods/Services: Holding and transferring money (remittance) does not constitute a “Supply” of goods or services by the applicant under Section 7.
Pure Agent Irrelevant: While the “Pure Agent” concept (Rule 33) strictly did not apply (as the applicant was not incurring expenses on behalf of the recipient to claim reimbursement), the core finding was that the money simply wasn’t the applicant’s revenue.
Taxable Component: Only the commission/subscription fees earned by the applicant are taxable.
Verdict: The applicant is not liable to pay GST on the balance freight deposited for onward remittance. [In Favour of Assessee]
KEY TAKEAWAYS
Pass-Through Mechanism: If a platform acts purely as a “money pipe” (collecting and remitting 100% of the specific amount to the actual service provider) without taking a cut from that specific amount, it is generally not taxable in the hands of the platform.
Consideration is Key: Always identify who is providing the service for which the money is paid. Here, the money was for the Trucker (Freight), not the Tech Platform (App Service).
Wallet/Escrow Distinction: This ruling supports the position that funds held in a “wallet” or “escrow” type arrangement for third-party settlement are not the income/turnover of the platform operator.
AUTHORITY FOR ADVANCE RULING, TAMILNADU
B2B Trucks (P.) Ltd., In re*
C. Thiyagarajan and B. Suseel Kumar, Member
TN/49/ARA/2025
NOVEMBER 17, 2025
1. M/s. B2B Trucks (P) Ltd., No. 23/Flat No.3, Mayflower Apartment, First Floor, Satyanarayana Avenue, R A Puram, Chennai, PIN Code 600028. (hereinafter called as the “Applicant”) are registered under the GST Act with GSTIN 33AALCB2798J1Z9. The applicant has sought advance ruling on the following question:
“Requesting for GST exemption in respect of an escrow deposit account to be opened and operated by them solely to facilitate forwarding of freight amounts as deposited by shippers to the accounts of carriers without any deduction.”
2. The Applicant has made a payment of application fees of Rs. 5,000/- each under sub rule (1) of Rule 104 of CGST Rules, 2017 and SGST Rules, 2017.
3. The applicant is operating an online portal to facilitate connecting shippers and carriers located across all states of India, without directly undertaking any responsibility for the physical movement of goods. After paying major portion of freight directly to carriers, the shippers deposit the balance amounts of the freight into their escrow account for forwarding it in full to the carrier’s accounts upon their fulfilling deliveries. Their role is only as a Pure Agent under Rule 33 of GST Rules, as part of their obligation for the subscriptions for facilitating transfer of funds as received, without any charge or mark up or deductions or utilization they receive from shippers and carriers. They shall pay GST on subscription separately as applicable.
4. The applicant falls under the administrative jurisdiction of ‘Center’. Since, no remarks have been received from the Central and State GST jurisdictional Authorities, it is construed that there are no pending proceedings against the applicant on the questions raised by them in their advance ruling application.
5. Personal Hearing
5.1 The applicant was given an opportunity to be heard in person on 07.10.2025 vide this office memorandum No.24/ARA, dated 29.09.2025. Sri. S. Venkat and Gautam Venkat, the Directors of M/s. B2B Trucks (P) Ltd. appeared for the personal hearing and reiterated the submissions made in their application for advance ruling.
5.2 They furnished additional submissions during the Personal Hearing containing copies of the original application, a correction request, Objective (Memorandum), etc. They further added that the mention of ‘Escrow Account’, in the ‘Statement of relevant facts’ as furnished in the original application may be treated as a ‘Current Account’ and that all other relevant facts in relation to the case, remain the same. Accordingly, they requested that the ‘Correction Request’, furnished along with the additional submissions filed during the personal hearing may be taken on record and Advance Ruling be considered accordingly.
5.3 The Members enquired whether they act as a ‘Pure Agent’ in respect of the amounts received by them, to which they replied that they act as ‘Pure Agent’ in this case, and that their role is restricted only to facilitating transfer of funds as received on receipt of POD (Proof of Delivery), without any charge or mark up. When the Members enquired about the consideration they would be receiving for rendering such service, they replied that they receive an amount of Commission from the shippers and carriers, on which GST is payable.
6. Discussions and Findings:
6.1 We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made during the course of personal hearing. We have also considered the issue involved, the relevant facts and the applicant’s submission/interpretation of law in respect of the question on which a ruling is sought.
6.2 Regarding the business model adopted in the instant case by the applicant, it is seen that they have stated that they operate an online portal to facilitate connecting shippers and carriers located across all states of India, without directly undertaking any responsibility for the physical movement of goods. After paying major portions of freights directly to carriers, the shippers deposit the balance amounts of the freight into their escrow account for forwarding it in full to the carrier’s accounts upon their fulfilling deliveries. The applicant reports that their role is restricted to being a Pure Agent under Rule 33 of GST Rules, as part of their obligation for the subscriptions for facilitating transfer of funds as received, without any charge or mark up or deductions or utilization they receive from shippers and carriers. They have also reported that they shall pay GST on subscription separately as applicable.
6.3 In this regard, we also find that through a ‘Correction Request’ filed during the personal hearing on 07.10.2025, the applicant has stated as follows :-
| • | Under the Statement of relevant facts in the application, it was stated that “Shippers shall deposit the balance amount of freight into our escrow account for forwarding it in full to the carriers accounts upon fulfilling deliveries”. |
| • | On further review of the operational requirements, the Applicant respectfully submits that instead of an escrow account, a separate current account will be used for routing the said freight amount and the amount involved may be part or full freight amount. The change does not affect the essential condition that the freight amount will be released to the carrier only upon submission of POB -remains unchanged. |
| • | The correction above is limited only to the mode of banking arrangement. The legal question for determination before this Hon’ble Authority, namely whether the Applicant qualifies as a pure agent under Rule 33 in respect of forwarding the freight amount to the carrier, remains unaltered. |
| • | The Applicant, therefore, prays that this clarification may kindly be taken on record and the application for Advance Ruling be considered accordingly. |
Given the facts and circumstances aforesaid, we are of the opinion that it becomes imperative to ascertain whether the amount involved herein shall be treated in the nature of a ‘consideration’ for a supply effected, if any, and whether the transaction involved herein constitutes a ‘supply’ under the CGST/TNGST Acts, 2017.
6.4 To begin with, the basic aspect as to whether the amount involved herein shall be treated as a ‘consideration’ as defined under the provisions of GST, is required to be examined. As per Section 2(31) of the CGST Act, 2017, the term ‘consideration’ is defined as follows :-
“(31) “consideration” in relation to the supply of goods or services or both includes-
| (a) | any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; |
| (b) | the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: |
Provided that a de posit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;”
6.5 Under the ‘statement of relevant facts’ in the application, the applicant states that for facilitating transfer of funds as received, without any charge or mark up or deductions or utilization, they receive subscriptions from shippers and carriers. In this regard, when the Members raised a specific query during the personal hearing held on 7.10.2025, as to whether they act as a ‘Pure Agent’ in respect of the amounts received by them, they replied that they act as ‘Pure Agent’ in this case, and that their role is restricted only to facilitating transfer of funds as received on receipt of POD (Proof of Delivery), without any charge or mark up. In this regard, we observe that as per the definition of ‘pure agent’ as defined under the ‘Explanation’ to rule 33 of the CGST Rules, 2017, a ‘pure agent’ is one who while making a supply to the recipient, also receives and incurs expenditure on some other supply on behalf of the recipient and claims reimbursement (at actuals, without adding it to the value of his own supply) for such supplies from the recipient of the main supply. In the instant case, it is clear that the applicant does not receive any other supply on behalf of the recipients or incurs any expenditure in relation to the same, and therefore we are of the opinion that the concept of ‘pure agent’ does not apply to the instant case. Further, the applicant reports that the only consideration that the applicant receives as a facilitator for transfer of such funds, is in the form of subscription from the shippers and carriers, on which the applicant undertakes to pay GST as applicable.
6.6 It may be seen that clause (a) to Section 2(31) of the CGST Act, 2017, considers ‘consideration’ as any payment made or to be made, (a) in respect of, (b) in response to, or (c) for the inducement of, supply of goods or services or both, whether by the recipient or by any other person. From the above, it is clear that any payment by the recipient or by any other person merits consideration as a ‘consideration’, provided the said payment is effected in respect of, in response to or for the inducement of supply of goods or services or both. However, from the “facts of the case’ furnished by the applicant, we come to understand that the actual flow of service (freight) happens between the shippers and carriers and a major part of the payment, i.e., consideration also takes place between the said parties. As reported by the applicant, only the balance portion of the freight amount is transferred to the current account of the applicant for forwarding it in full to the carrier’s accounts upon fulfilling their (carrier’s) delivery obligation. Therefore, though the balance freight amount may be considered as a payment to be made in lieu of the freight services rendered by the carrier to the shipper, it is clear the said freight amount held by the applicant is not in respect of any supply of goods or services or both by the applicant, in any manner. Accordingly, the balance amount held by the applicant cannot be considered as a ‘consideration’ from the perspective of the applicant.
6.7 Notwithstanding the same, even in the event of considering the deposit as ‘consideration’, it is seen that the proviso to Section 2(31) of the CGST Act, 2017, which defines the term ‘consideration’, reads thus,
“Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;”
And it signifies and conveys the fact that even in cases where a deposit is made, and even when the said deposit is in respect of supply of goods or service or both, the said deposit is not to be considered as ‘consideration’, until and unless the supplier applies/treats such deposit as consideration for the said supply. It therefore becomes clear that the balance freight amount involved herein which is held as deposit and transferred by the applicant to the parties concerned, cannot be considered as a ‘consideration’ accruing to the applicant in any manner, whatsoever.
6.8 Accordingly, we now set out to examine as to whether the transaction involved herein constitutes a ‘supply’ under the CGST/TNGST Acts, 2017. As per Section 7 of the CGST Act, 2017, the term ‘Supply’, includes –
“7. Scope of supply.- (1) For the purposes of this Act, the expression “supply” includes –
| (a) | all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; |
| (b) | import of services for a consideration whether or not in the course or furtherance of business; and |
| (c) | the activities specified in Schedule I, made or agreed to be made without a consideration; |
(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.
(2) Notwithstanding anything contained in sub-section (1),-
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council,
shall be treated neither as a supply of goods nor a supply of services.
(3) Subject to the provisions of [sub-sections (1), (1A) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as-
| (a) | a supply of goods and not as a supply of services; or |
| (b) | a supply of services and not as a supply of goods.” |
In terms of Section 7 of the Act, ibid, it is clear that the term ‘Supply’ includes all forms of supply of goods/services or both such as sale, transfer, barter, exchange, licence, rental or disposal made or agreed to be made for a consideration in the course of furtherance of business. Accordingly, the activity in relation to any supply, should be made for a consideration, and under the facts and circumstances of the instant case, we find that the only activity of the applicant that merits payment of a consideration, is the applicant’s role as a facilitator or an agent in holding and transferring the balance freight amounts which does not belong to the applicant and which belongs to the parties concerned. Therefore the balance freight amount that is held as deposit with the applicant and which is liable to be transferred, per-se, as per the directions of the parties concerned, cannot be considered as ‘consideration’ accruing to the applicant in lieu of any supply made by them. Thus, we observe that no supply of goods or service or both takes place in the instant case, except for the receipt of subscription or commission by the applicant on which the applicant undertakes to pay GST, for extending their role of a facilitator/agent between the shipper and the carrier.
6.9 In fine, once it is held that the freight amount deposited with the applicant, does not constitute a ‘consideration’ to the applicant, and once it is clear that no supply of goods or service or both is involved in the instant case, we are of the opinion that the applicant is not liable to pay taxes under GST on the deposit amount which does not belong to the applicant.
7. In view of the above discussion, we rule as under :-
RULING
Considering the facts of the case furnished by the applicant, the applicant is not liable to pay GST on the balance amount of freight deposited by the Shippers into the current account of the applicant which in turn is meant to be forwarded to the accounts of carriers without any deduction.