GST on Transport Services

Transportation is a critical aspect of any business that deals with the movement of goods or people from one location to another. In India, the transportation industry plays a vital role, contributing significantly to the country's economy. The introduction of the Goods and Services Tax (GST) has brought significant changes in the taxation system, including transportation services. The GST Council has levied GST on transportation business, and it is essential for businesses to understand the details of GST on transportation services and the applicable GST rates.

GST on Transport: Road Services in 2025

The GST Council has fixed different GST rates for transportation services based on the mode of transport and nature of service. The transportation services are classified as follows:

• Public transport for passengers – No GST
• Travel by metered auto-rickshaw, e-rickshaw, or taxi – No GST
• Non-AC buses (contract or stagecoach services) – No GST
• AC buses (contract or stagecoach services, without claiming Input Tax Credit) – 5% GST
• Radio taxis and similar ride services – 5% GST
• Rental services for cars, buses, and coaches – 18% GST

GST on Road Transport Services for Goods (GTA, non-GTA)

Goods Transport Agency (GTA) is a business that provides road transport services for goods and issues a consignment note as proof.

GST on goods transport services by a GTA:

• 5% GST if the business does not claim Input Tax Credit (ITC)
• 12% GST if the business does claim ITC

The GST rate for GTAs may also depend on the type of goods being transported and the total value of the consignment.

GST on Passenger Transport Services (Public Transport, Taxis, Cabs)

Passenger transport services in India include public transport, taxis, and cabs, each with different GST rates based on the type of service.

GST on Public Transport Services

Public transport options like buses, metro, and trains are generally exempt from GST. This helps keep essential and affordable travel options accessible to passengers.

GST on Taxis and Cabs

For privately operated services such as taxis, cabs, and radio taxis, GST is usually charged at 5%. However, operators can choose to pay GST at 12% if they want to claim a full input tax credit (ITC), which allows them to reduce their tax liability by offsetting it against other business costs.

Different GST rates ensure that public transport remains affordable while giving private operators flexibility in managing their taxes.

GST on Transport: Rail Services in 2025

In 2025, GST on rail transport services depends on the class of travel. A 5% GST is applied to passenger tickets booked in First Class or air-conditioned coaches like 1st AC, 2nd AC, 3rd AC, and AC Chair Car. However, tickets for Sleeper Class, Second Class, and General compartments are exempt from GST.

This system helps keep basic travel options affordable while applying tax to premium travel services.

GST on Rail Transportation Services for Freight

GST on rail freight depends on the type of goods being transported. Essential items like agricultural produce, milk, and salt are exempt from GST. However, general cargo and industrial products are taxed at 5%.

Here is how GST applies to different suppliers:

Registered businesses: Companies registered under GST that transport goods by rail must pay 5% GST. They can claim an input tax credit (ITC) on this amount, which is verified through invoice matching.

Unregistered businesses and customers: When goods are transported to individuals or unregistered businesses, the same 5% GST rate applies. However, this tax cannot be claimed as an ITC and is directly paid to the government.

GST on Transport: Air Services in 2025

GST on air travel in India varies based on the type of service and ticket class:

GST on Economy Class Tickets
Economy class air tickets are taxed at 5% to keep essential travel affordable.

GST on Business Class Tickets
Business class air tickets have a 12% GST rate, reflecting the premium nature of the service.

GST on Chartered Flights for Pilgrimage
Chartered flights for religious travel are also taxed at 5%, making pilgrimage journeys more accessible.

GST on Aircraft Rentals and Chartered Flights
Renting an aircraft, with or without an operator, is taxed at 18%, ensuring a consistent tax policy for these services.

GST on Air Cargo Services
Transporting goods by air carries an 18% GST rate, helping standardize taxation in the logistics sector.

For business travelers, GST paid on air tickets can be claimed as an input tax credit (ITC). Airlines can also claim ITC on input services for economy class, while for business class, they can claim ITC on food, spare parts, and other inputs, excluding fuel. This system helps balance tax efficiency with affordable travel options.

GST on Transport: Water Service in 2025

GST on Water Transport for Passengers

Passenger water transport services are taxed at 5% under GST. However, businesses using these services cannot claim an input tax credit (ITC) on this tax. This helps keep water travel affordable while simplifying tax compliance.

GST on Water Transport for Goods

For cargo transport, including renting or hiring freight vessels (with or without an operator), GST is charged at 18%. This applies to ships used for logistics, trade, and other transport needs.

GST on Other Water Transport Services in 2025

Inland waterway transport is also taxed at 5%, without ITC benefits. This ensures cost-effective transport while maintaining a straightforward tax structure.

Knowing GST rates on different transport services helps businesses manage costs and stay tax-compliant.

Important points to know about GST on the transport sector

The transport sector's goods movement occurs either through Goods Transport Agencies (GTAs) using hired vehicles, or transporters operating their own vehicles. GTAs provide services like loading, unloading, packing, unpacking, transshipment of goods, and also provide temporary storage if needed. To classify the service under GTA for Goods and Services Tax (GST) application, the transporter issues a consignment note. This note is proof that the responsibility of the goods has been transferred to the transporter until they reach the receiver.

The GST on GTAs differs based on whether an Input Tax Credit (ITC) is availed. If ITC is utilised, GTAs are charged 12% GST. If not, the GST rate is 5%. Other transport services like rental service providers are charged differently. For instance, GST rates for renting road vehicles, freight aircraft, or water vessels (regardless of whether they come with an operator) are all 18%.

These rates help in clarifying tax rules across various segments of the transport industry. They are part of the GST framework, simplifying compliance, and maintaining clear tax treatments for all transport service providers.

Benefits of GST on transportation services

The implementation of GST has brought various benefits to the transportation industry in India. Some of the significant benefits are:

• Single taxation: GST has replaced various taxes like central excise, service tax, and state VAT with a single tax, simplifying the taxation process for businesses.
• Input tax credit: GST provides input tax credit to the businesses, allowing them to claim the tax paid on the purchase of goods and services.
• Increased compliance: GST has brought transparency and accountability in the system, increasing the compliance rates among businesses.
• Reduced costs: GST has reduced the overall tax burden on the transportation industry, allowing businesses to operate at lower costs.

Exemption of GST on transport

• Transportation services provided by the Indian Railways for passengers, goods, or specified items like essential commodities are exempt from GST.
• Services provided by public transport operators, including metro, local trains, and buses, are also exempt from GST.
• Transportation of agricultural produce, milk, and food grains by road, rail, or vessel is exempt from GST.
• Services provided by educational institutions for transportation of students, faculty, or staff are exempt from GST.
• Air transportation of passengers from airports located in the Northeast region, Andaman and Nicobar Islands, Lakshadweep, and Himachal Pradesh is exempt from GST.

What is a Goods Transport Agency (GTA) in GST?

A Goods Transport Agency (GTA) in the context of GST refers to any person or organization that provides services for the transportation of goods by road and issues a consignment note. Under GST regulations, GTA services are subject to a reverse charge mechanism, where the liability to pay tax shifts from the service provider to the recipient of the service. GTAs typically include trucking companies, logistics firms, and other entities involved in the movement of goods by road. It's important for businesses to be aware of GTA provisions to ensure compliance with GST regulations when availing of such services.

What is the rate of GST on GTA?

Service by a GTA	GST rate
Carrying agricultural produce, milk, salt, food grains including flour, pulses, rice, organic manure, newspapers or magazines registered with the Registrar of Newspapers, relief materials meant for victims of natural or man-made disasters, defence or military equipment	0%
Carrying goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage is less than Rs. 1500	0%
Carrying goods, where consideration charged for transportation of all such goods for a single consignee does not exceed Rs. 750	0%
Any other goods	5% No ITC or 12% with ITC
Used household goods for personal use	0% **
Transporting goods of unregistered persons	Earlier exempted, but later made taxable; currently, list yet to be notified**
Transporting goods of unregistered casual taxable persons	Earlier exempted, but later made taxable; currently, list yet to be notified**
Transporting goods (GST paid by GTA)*	5% No ITC or 12% with ITC
Transporting goods of 7 specified recipients*	Irrespective of GTA choosing 12% (with ITC) or 5% (without ITC), if the GTA opts for paying tax on forward charge by giving a yearly declaration^, then it appears in the tax invoice. If that declaration is not given, then GTA has chosen for reverse charge where the recipient must deposit tax and ITC cannot be availed by the GTA.
Hiring out vehicle to a GTA	0%

*As per Notification No. 20/2017-Central Tax (Rate) 22nd August, 2017
** On 31st December 2018, the Government cancelled Notification No. 32/2017-Central Tax (Rate) dated 13th October, 2017, making purchases from unregistered dealers taxable. However, the list of registered persons or transactions is yet to be notified.
^ Declaration must be given in Annexure - V by 15th March of the year before the financial year begins. The GTA must give the below declaration while issuing invoices.

What is a consignment note?

A consignment note, also known as a delivery note or waybill, is a crucial document used in the transportation of goods by road. It serves as a proof of contract between the sender (consignor) and the carrier (transporter) for the delivery of goods from one location to another. The consignment note contains essential information about the shipment, including details of the sender and recipient, description of the goods, quantity, weight, value, and any special instructions or handling requirements.

Key components of a consignment note include

• Sender and recipient details: Names, addresses, and contact information of the sender (consignor) and recipient.
• Goods description: Description, quantity, weight, and value of the goods being transported.
• Transport details: Mode of transportation, vehicle number, and expected delivery date.
• Signature: Confirmation of receipt by the carrier and the recipient upon delivery.

Consignment notes play a vital role in facilitating smooth and transparent logistics operations by providing a record of the shipment's journey and ensuring accountability between parties involved in the transportation process.

Transport charges HSN code

HSN code (Harmonised system nomenclature) is a harmonised classification system used to classify goods and services in India. The HSN code for transport charges is 9967. The businesses that provide transportation services should mention the transport charges HSN code on the invoices for proper classification and taxation.

The GST on transportation business has brought significant changes to the industry, and businesses must understand the applicable GST rates and rules for proper compliance. It is essential to mention the transport charges HSN code on the invoices and take advantage of the benefits offered by GST.

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