GST on Road Transport Services: Passengers and Goods
Road transport services fall under different GST rates depending on the type of service provided. The GST framework distinguishes between passenger and goods transport services, offering different tax options for each.
Passenger Transport Services
- Public Transport:
Services such as metered taxis, auto-rickshaws, and non-air-conditioned public buses are generally exempt from GST. This keeps essential travel affordable for the general public.
- AC Buses and Taxis:
Air-conditioned buses and private cab services, including radio taxis, attract a 5% GST. However, if operators wish to claim full Input Tax Credit (ITC), they can opt to pay GST at 18%.
- Car, Bus, and Coach Rentals:
Rentals of vehicles with drivers now attract an 18% GST rate. This is an increase from the previous 12% applicable when claiming full ITC, aligning with the broader goal of simplifying the tax structure.
Goods Transport Agency (GTA) Services
Goods Transport Agencies (GTAs) that provide goods transport by road and issue a consignment note are given two GST rate options:
- 5% GST (Without ITC):
This option is for GTAs that do not claim input tax credit on their expenses.
- 12% GST (With ITC):
GTAs opting for this rate must pay GST under the forward charge mechanism, allowing them to claim full ITC on inputs like fuel, vehicles, and other operational costs.
This dual-rate system offers flexibility, enabling GTAs to choose the model that best fits their operations—either offering customers a lower rate or optimising their tax credits.
GTA Exemptions
Certain services provided by GTAs are exempt from GST, including:
- Transport of agricultural produce
- Milk and food grains
- Newspapers
- Consignments with freight charges below Rs. 1,500
- Total freight for a single consignee below Rs. 750
These exemptions help keep essential goods transport services affordable and accessible.
GST on Rail, Air, and Water Transport
The GST framework for transportation services is designed to ensure a balance between generating tax revenue and maintaining affordability for businesses and the public. Here’s how different modes of transport are taxed:
Rail Transport Services
- Passenger Travel:
Travel in non-AC classes such as Sleeper and Second Class continues to be exempt from GST. However, tickets for AC classes and First Class are subject to a 5% GST.
- Freight Services:
Transporting essential goods like milk and agricultural produce by rail remains GST-exempt. For general cargo transported by rail, a 5% GST applies.
Air Transport Services
- Passenger Travel:
Economy class air travel continues to attract a 5% GST. However, GST on business class, first class, and premium economy tickets has been revised upward from 12% to 18%, following recent updates by the GST Council.
- Air Cargo Services:
The transportation of goods by air is taxed at a standard GST rate of 18%.
Water Transport Services
- Passenger Travel:
Passenger transport via water (such as ferries or boats) is taxed at 5% GST.
- Goods Transport:
The movement of goods by water, including vessel rentals, is subject to 18% GST.
Transport Charges HSN Code
Transport services do not fall under a single HSN code; instead, they are categorised based on the type of service provided:
- HSN Code 9965 – This code is assigned to Goods Transport Services and should be used by goods transport agencies (GTAs) and freight service providers.
- HSN Code 9964 – This code covers Passenger Transport Services and applies across all transport modes, including road, rail, air, and water.
Important points about GST on the transport sector
- Forward Charge vs. Reverse Charge: GTAs can choose to either pay GST themselves (forward charge) or transfer the tax liability to the service recipient (reverse charge).
- Advantages of GST: The GST system has consolidated various taxes into one, introduced Input Tax Credit (ITC) benefits, and enhanced transparency and accountability within the sector.
- Exemptions: Important exemptions continue to apply to certain goods (such as agricultural produce) and services (like public transport), helping to keep essential services affordable.
Conclusion
Transportation is vital for businesses, and recent GST reforms have made the tax framework for this sector more straightforward. Whether it’s road or air transport, staying informed about the latest GST rates is essential for compliance. With this knowledge, companies can make better decisions regarding their logistics and operations. Additionally, a business loan can support smoother financial management and help handle tax obligations effectively.
Also, check more related articles on GST here
