GST on logistics services
GST applies to all logistics service providers. The government levies GST on various services such as transportation of goods, warehousing, courier services, packing and unpacking services, etc.
Before GST, logistics services were taxed through various taxes such as value added tax (VAT), service tax, and central excise duty. However, with the introduction of GST, all these taxes have been subsumed under one tax.
How GST applies to logistics and transportation
GST is applied differently across various parts of the logistics and transport sector. Here is a simple breakdown:
1. Goods Transport Agency (GTA)
A Goods Transport Agency (GTA) is a person or company that transports goods by road and issues a consignment note.
GTA services are subject to GST, which can be paid in two ways:
- Forward charge: The GTA adds GST to the invoice and pays it to the government.
- Reverse charge: The recipient of the service (such as a factory, company, or business entity) pays GST on behalf of the GTA.
2. Passenger Transportation
Passenger transport by air, rail, or road (such as buses and taxis) is subject to GST at different rates based on the type of service.
For example:
- Economy class air travel – 5% GST
- Business class air travel – 12% GST
- AC buses – 5% GST
- Non-AC public transport buses – Exempt from GST
3. Freight Forwarding and Warehousing
Freight forwarders and logistics intermediaries involved in import and export activities are liable to GST at 18%.
Warehousing and storage services are also taxed at 18%, except for agricultural produce, including unprocessed food grains, which are exempt.
4. Courier Services
Courier and express parcel delivery services attract GST at the rate of 18%.
How to calculate GST on logistics services
The Harmonised System of Nomenclature (HSN) is a coding system used to classify goods and services for trade and tax purposes. Below is a list of HSN codes relevant to logistics services:
Service
|
HSN Code
|
Goods Transport Services
|
9965
|
Transport of goods such as live animals, furniture, and letters or parcels by road
|
996511
|
Transport of goods such as live animals, furniture, and letters or parcels by rail
|
996512
|
Transport through pipelines for natural gas, petrol, or sewage
|
996513
|
Other land transport services
|
996519
|
Transport by waterways (overseas)
|
996521
|
Inland water transport
|
996522
|
Transport by air
|
996531
|
Space transport services
|
996532
|
GST exemptions for logistics and transportation services
Not all transport services are subject to GST. To reduce the tax burden on essential services, the government has granted certain exemptions. Key exemptions include:
- Transport of agricultural produce
- Transport of milk, salt, food grains, and organic manure
- Passenger travel by non-AC stage carriage buses
- Inland waterway transport of goods and passengers
These exemptions are intended to protect consumers and help keep the cost of essential goods affordable.
Impact of GST on logistics services
The implementation of GST has had a significant impact on the logistics sector. Here are some of the impacts of GST on logistics:
- Reduced logistics costs: GST has led to reduced logistics costs as logistics companies no longer need to pay multiple taxes. GST has ensured that logistics companies can provide their services to clients at lower rates, resulting in overall cost savings.
- Improved supply chain efficiency: GST has led to an improved supply chain efficiency as it has reduced the lead time of transporting goods across different states. With the elimination of multiple checkpoints, paperwork and inspections, a faster movement of goods from one state to another is possible. This has resulted in faster delivery of goods and a more efficient supply chain.
- Transparency of the tax system: GST has brought about greater transparency in the tax system. The entire tax system is now centralised and online. This has made it easier for logistics companies to maintain their compliance with the new tax system.
With the implementation of GST, the logistics sector has undergone significant changes. GST has led to a unified and simplified tax system for logistics companies. The government has categorised logistics services under different rates of GST. GST has reduced logistics costs, improved supply chain efficiency, and made the tax system more transparent.
GST rules and compliance for logistics companies
To operate smoothly under GST, logistics and transport businesses must follow certain rules and procedures:
- GST Registration
Registration is compulsory for transporters and logistics companies whose turnover exceeds the prescribed limit (Rs. 20 lakh for services and Rs. 40 lakh for goods).
Goods Transport Agencies (GTAs) must register if they choose the forward charge option or provide taxable services that are not covered under the reverse charge mechanism.
- E-Way Bill Compliance
An e-way bill is required for the movement of goods valued above Rs. 50,000, whether across states or within a state (as applicable in many states).
It includes details such as the consignor and consignee, description and value of goods, and vehicle information. This digital system has helped reduce tax evasion and improved real-time tracking of goods.
- Reverse Charge Mechanism (RCM)
In many cases, GST on GTA services is payable by the service recipient under the reverse charge mechanism.
Businesses using these services must declare and pay the tax themselves and can later claim it as Input Tax Credit (ITC).
- Filing GST Returns
Logistics companies are required to file GST returns on a monthly or quarterly basis (such as GSTR-1 and GSTR-3B) to report their transactions.
Regular reconciliation with GSTR-2A and GSTR-2B is essential to ensure correct ITC claims.
