Transportation is a crucial driver of India’s economy, connecting markets and driving trade. The implementation of GST on transport services has significantly transformed the tax landscape, impacting everything from pricing to operational costs within the industry.
The GST rates on transport services differ based on their nature and are categorized by HSN codes. These distinctions provide clarity and ease of compliance for businesses. Are you curious about how these tax rules impact India’s transport sector? Let’s learn more about it!
Table of Contents
Classification of Transport Services in India
1. Road Transport
This includes goods and passenger transport by buses, trucks, and other vehicles. It is a primary mode for domestic trade, especially in rural and urban areas.
2. Rail Transport
Railways serve as a backbone for long-distance passenger and freight services. They are crucial for bulk goods like coal, steel, and agricultural produce.
3. Air Transport
This sector includes domestic and international flights for passengers and cargo. It’s essential for time-sensitive deliveries and connecting remote regions.
4. Water Transport
Includes services via inland waterways and coastal shipping. It’s vital for transporting bulk commodities and reducing road congestion.
5. Others
GST on other transport services such as inland waterways has a 5% GST without ITC.
1. GST on Road Transport Services in 2024
GST rates on road transport vary depending on the specific mode of transportation chosen.
Here’s the list of road transport services and their GST Rates
Types of Road Transport Services |
GST Rate |
| Public Transport for passengers | NIL |
| Transport through metered auto rickshaw, e-rickshaw, or taxi | NIL |
| Transport through Non-AC Contract Carriage or Stagecoach | NIL |
| Transport through AC Contract Carriage or Stagecoach (without Input Tax Credit) | 5% |
| Transport through radio taxi and similar other services | 5% |
| Transport through rental services for cars, buses, coaches, | 18% |
GST on Road Transport Services for Goods (GTA, non-GTA)
In the transport industry, goods can be moved either through a Goods Transport Agency (GTA) or non-GTA also known as a regular transporter.
A GTA uses hired vehicles and offers additional services like loading, unloading, packing, unpacking, transshipment, and temporary warehousing.
For a transporter to be classified as a GTA, they must issue a consignment note, which transfers the responsibility of the goods to the transporter until they are delivered to the consignee. Without this note, the service is not considered under the GTA category.
The rate of GST that applies to the GTA depends on availing of the input tax credit.
The details of the same are below.
Input Tax Credit |
Rate of GST |
| Availed | 12% |
| Not availed | 5% |
The applicable rates for rental services or non-GTA are below.
Rental Services |
Rate of GST |
| Road Vehicles including trucks (with or without operator) | 18% |
| Freight Aircraft (with/without operator) | 18% |
| Water Vessels including Freight Vessels (with/without operator) | 18% |
GST on Road Transport Services for Passengers (Public Transport, Taxis, Cabs)
Passenger transportation in India includes services such as public transport, taxis, and cabs.
Public transport, like buses and trains, is essential for daily commuting and is often operated by government agencies, providing an affordable and efficient means of travel for the masses.
Taxis and cabs, which are usually privately owned, offer more convenience and flexibility, catering to individual or small-group needs.
There is GST on certain types of passenger transportation in India. The GST rates vary depending on the service:
1. Public Transport
Services provided by the government or local authorities, such as buses, metro, and railways for public transport, are generally exempt from GST.
2. Taxis and Cabs
Typically, a 5% GST rate applies to services provided by taxis, cabs, and radio taxis. However, service providers can opt to pay GST at a 12% rate to avail of the benefit of a full input tax credit.
Related Read: GST on Cars in India: GST Rates for New, Used & Electric Cars
2. GST on Rail Transport Services in 2024
GST is applicable on rail tickets, but it varies based on the class of travel and the nature of goods and services. This differentiation helps maintain affordability for basic travel options while applying tax to premium services.
GST on Rail Transport Services for Passengers
Rail transport for passengers has different GST rates based on the class of travel:
Class of Travel |
GST Rate |
| Sleeper, Second Class, General | Exempt |
| First Class, AC Class | 5% |
GST on Rail Transport Services for Freight
The GST on freight transportation via rail also varies based on the type of goods and services provided:
Type of Goods or Services |
GST Rate |
| Essential goods (like agricultural produce, milk, salt) | Exempt |
| Other goods (general cargo, industrial products) | 5% |
GST on rail freight applies as follows:
1. Registered Taxable Persons
Businesses that transport goods via rail and are registered for GST must pay a 5% GST rate. They can claim an input tax credit (ITC) on this tax, with the ITC claim validated through invoice matching.
2. B2C Supplies (Unregistered Persons)
For businesses transporting goods to customers or unregistered entities, the same 5% GST rate applies to rail freight. However, this tax is not eligible for ITC and is directly deposited into the government treasury.
Read About: Latest Railway Sector Updates in 53rd GST Council Meeting
3. GST on Air Transport Services in 2024
GST on air transport is primarily classified based on the type of air travel service:
Here’s the list of air services and their GST rates:
Types of Air Ticket |
GST Rate |
| Economy Class Air Tickets | 5% |
| Chartered Flights for Pilgrimage | 5% |
| Business Class Air Tickets | 12% |
| Rental Services of Aircraft (with or without operator)/Chartered Flights | 18% |
GST on Air Transport Services for Passenger Tickets (economy, business class)
- Economy class air tickets are subject to a 5% GST rate, aiming to keep essential travel affordable.
- Business class tickets attract a higher GST rate of 12%, reflecting the premium nature of the service.
- If you are traveling for business, you can claim the GST on air tickets as an input tax credit (ITC) for your business.
- Airlines can also claim ITC on input services for economy class passengers.
- For business class, airlines can claim ITC on food items, spare parts, and other inputs, though fuel costs are excluded.
GST on Air Transport Services for Cargos
For air cargo transportation, GST is generally levied at 18%. This rate applies to the transportation of goods by air, ensuring uniform taxation for air freight services.
4. GST on Water Transport Service in 2024
GST on Water Transport Services for Passengers
Water transport services for both goods and passengers generally incur a GST rate of 5%. However, this rate does not allow for input tax credit (ITC), meaning businesses cannot claim back the tax paid on these services. This standard rate aims to simplify tax compliance while maintaining cost-efficiency for users of water transport.
GST on Water Transport Services for Cargos
Rental services for water vessels, including freight vessels (with or without an operator), attract an 18% GST. This rate applies to the leasing or hiring of vessels used for various purposes, including transportation and logistics.
GST on Other Transport Services in 2024
GST on other transport services, such as inland waterways, is set at 5%. This rate applies without the benefit of input tax credit (ITC), meaning businesses cannot claim ITC on these services.
Understanding GST rates across different transport modes is crucial for businesses in the transportation industry to ensure accurate compliance and cost management.
HSN Code for Transport Charges in 2024
The HSN code for transport charges is 9967. Mentioning this code on invoices is essential for proper classification and taxation, ensuring clarity and accuracy in financial transactions.
Advantages of GST on Transportation Services
1. Single Taxation
GST simplifies the tax structure by consolidating multiple indirect taxes into a single tax, making it easier for businesses to manage and comply with. This reduces the complexity of the tax system and enhances transparency.
2. Input Tax Credit (ITC)
GST allows businesses to claim input tax credits on the taxes paid for inputs, which helps in reducing the overall tax burden. This benefit improves cash flow and encourages investment in the transportation sector.
3. Increased Compliance
With GST’s standardized rules and electronic filing system, compliance becomes more straightforward and efficient. Businesses benefit from a more organized tax administration and reduced chances of discrepancies.
4. Reduced Costs
By eliminating the cascading effect of taxes, GST helps in lowering the overall cost of transportation services. This reduction in tax costs can be passed on to consumers, making services more affordable.
List of Goods and Services Exempted Under GST Rates on Transport
The transportation of goods via air, rail, road, and inland waterways are exempt from GST rates
GST in the following cases:
- Relief materials for victims of natural or man-made disasters, mishaps, or accidents.
- Military and defense equipment.
- Essential food items like pulses, milk, salt, flour, rice, and other food grains.
- Agricultural produce, organic manure, and related products.
- Newspapers and magazines registered with the Registrar of Newspapers.
- If the total amount charged for transporting goods is less than Rs. 1,500.
- Transport of household goods.
- Transport of goods for unregistered persons or non-GTA.
Read More About: List of Goods and Services Exempt Under GST
What is the Goods Transport Agency (GTA) in GST?
The Goods Transport Agency (GTA) in GST refers to a service provider that offers the transportation of goods using a fleet of hired vehicles.
GTAs are responsible for providing and managing the logistics and transport of goods from one place to another.
They are required to issue consignment notes for the goods transported, which serve as proof of the transfer of goods and are crucial for GST compliance.
GTAs must adhere to specific GST regulations, including charging GST at applicable rates and providing detailed invoices to clients.
What is a Consignment Note?
A consignment note is a document issued by the transporter that confirms the receipt of goods for transportation. It acts as proof of the transfer of goods and is crucial for GST compliance.
Components of a Consignment Note
A consignment note typically includes details such as:
- Name and address of the consignor (sender) and consignee (receiver)
- Description of the goods
- Quantity and weight of the goods
- Transporter’s details and consignment number
- Date and place of issue
Conclusion
Understanding GST regulations for various transport services helps businesses manage costs and ensure compliance. From passenger and cargo transportation to specific classifications like HSN codes and GTA requirements, staying informed is key to navigating the complexities of GST in the transportation sector.
Frequently Asked Questions (FAQs)
1. Is GST applicable on the transportation of household goods?
Yes, GST is applicable on the transportation of household goods, with rates depending on the service provider’s classification (GTA or otherwise).
2. How to file a transporter GST return?
Transporters must file GST returns using the GST portal, providing details of their services and applicable GST rates.
3. How to add transport charges to a GST invoice?
Transport charges should be mentioned in the invoice with the applicable GST rate, ensuring proper classification and compliance.
4. What is the transporter ID in GST?
The transporter ID is a unique identification number assigned to transporters for GST purposes, used for tracking and compliance.
5. Is GST registration mandatory for transporters?
Yes, GST registration is mandatory for transporters who exceed the prescribed turnover threshold or provide taxable services.
6. What are the rules for GST transport?
GST rules for transport include adherence to applicable GST rates, issuing consignment notes, and maintaining accurate records for compliance.
7. Do different types of transport services have different GST rates?
Yes, different types of transport services, such as air, rail, and water, have varying GST rates based on the nature of the service and its classification.
