GST on Freight — Rates, Applicability & Exemption Guide

GST applies to the supply of goods, services, and freight transportation across India.

Freight charges via road, rail, air, or sea are taxable under GST regulations.

Let’s understand how GST applies to freight with a real-life example:

Rahul, a furniture manufacturer from Jaipur, gets an order of 1,000 wooden chairs from a dealer in Bengaluru. Each chair weighs 5 kg, so the total shipment weighs 5,000 kg or 5 tonnes.
Instead of a regular courier, Rahul books a freight truck, which charges ₹4 per kg, totalling ₹20,000 for transportation.

The transport company issues a consignment note, making it a Goods Transport Agency (GTA) under GST rules. Rahul, being a GST-registered business, pays 5% GST = ₹1,000 under the Reverse Charge Mechanism.

But here’s the good part: he can claim ₹1,000 as Input Tax Credit (ITC) while filing returns.

Isn’t it interesting how a simple transport bill connects taxation, logistics, and savings? This is how GST on freight works in India: clear, organised, and easy to follow!

What is Freight? 

Freight means large goods transported through road, rail, air, or sea transport services. It also includes the cost charged for moving goods from one place to another.

Let’s understand it with the help of an example:
 

Let’s say a company sends 1,000 kg of rice from Delhi to Mumbai by truck.
 

The truck service charges ₹5 per kg, so the total freight cost is ₹5,000.
 

Now, GST (say 5%) is added on this ₹5,000 = ₹250.
 

So, the company pays ₹5,250 in total for transporting the rice.
 

Key Features of Freight:
 

• Usually involves bulk transportation of goods
   
• Can be domestic or international
   
• Involves modes like road, rail, air, and sea
   
• Managed by logistics and freight companies
   
• Crucial for trade, business growth, and supply chains
   

Who is Liable to Pay GST on Freight?

GST on freight is paid by the service recipient — the one who bears the freight cost. For instance, if the consignor pays ₹10,000 to the Goods Transport Agency (GTA), they are liable for GST. If the consignee pays, the responsibility shifts to them. 

However, who pays GST — the GTA or the recipient — depends on the recipient's classification. If they fall under any of the 7 specified categories, GST is payable on a reverse charge basis by the recipient.
 

1. Factory registered under the Factories Act, 1948
    
2. GST-registered person (even with turnover below ₹20 lakh for services or ₹40 lakh for goods)
    
3. Body corporate (e.g., Pvt. Ltd. company, LLPs)
    
4. Co-operative society registered under the relevant laws
    
5. Partnership firm or association of persons (AOP)
    
6. Society under Societies Registration Act, 1860
    
7. Casual taxable person (someone supplying goods/services occasionally in a taxable territory)
    

For example, if a registered factory in Pune books freight worth ₹50,000 from a GTA, it must pay 5% GST (₹2,500) on a reverse charge (Reverse charge means the buyer, not the seller, pays GST on specific notified goods or services) basis and can claim it as input tax credit (ITC).

However, if the GTA provides freight service to unregistered persons such as:
 

• Individual (not registered under GST)
   
• Hindu Undivided Family (HUF)
   
• Sole proprietor (unregistered)
   

Then the GTA is responsible for paying GST at 5% or 12%, depending on whether input credit is availed.

Summary:
 

• Freight Cost Example: ₹10,000 – GST @5% = ₹500
   
• GST is paid by the one who bears the freight cost
   
• Reverse Charge applies to 7 specific categories
   
• Others: GTA pays the GST
   
• Registered recipients can claim ITC against paid tax
   

Rate of GST on Freight Charges:

Freight charges refer to the amount paid for transporting goods by land, air, or sea. Under GST, the applicable tax rates for freight services offered by a Goods Transport Agency (GTA) are:
 

• 5% GST (without Input Tax Credit)
   
• 12% GST (with Input Tax Credit)
   

However, GST is exempt on the transportation of certain goods. The table below outlines the applicable GST rates and exemptions:
 

This makes it easier for businesses and individuals to determine whether freight charges attract GST or qualify for exemption based on the goods and conditions involved.

What is a Goods Transport Agency (GTA)?

Let’s say Rajeev, a tile manufacturer in Nagpur, gets an order for 2,000 boxes (20,000 kg) from Kolkata. To ship them, he contacts Sharma Road Carriers, which agrees to transport the goods for ₹80,000. They issue a consignment note detailing the sender, receiver, and freight charges. 

By doing so, Sharma Road Carriers qualifies as a Goods Transport Agency (GTA) as defined under Section 65B(26) of the Finance Act, 1994. Since they offer road transport and issue a consignment note, GST applies, with tax liability depending on who pays and the applicable rate.

Key Features of a GTA:
 

• Provides goods transport services by road
   
• Issues a consignment note (mandatory)
   
• Can be an individual, firm, or company
   
• Subject to GST (5% or 12%) depending on ITC claim
   

Conclusion

GST on freight depends on who pays for the transport and the type of goods being moved. If you're a GST-registered business like Rahul or Rajeev, you may pay 5% or 12% GST under reverse charge, but you can claim it back as Input Tax Credit (ITC). Goods Transport Agencies (GTAs) that issue consignment notes are key players. Some items, like food grains and manure, are exempt. Knowing how GST works on freight helps your business stay legal, save money, and run smoothly!

Frequently asked questions (FAQs)

Who is liable to pay GST on freight services?
The person who pays the freight charges—either consignor or consignee—is liable to pay GST.
 

What is the GST rate on freight by Goods Transport Agencies (GTA)?
GST is 5% without ITC or 12% with ITC on freight services by a GTA.
 

What is a consignment note under GST?
A consignment note is a document issued by a GTA, making the service taxable under GST.
 

Can businesses claim Input Tax Credit (ITC) on freight GST?
Yes, GST-registered businesses can claim ITC on GST paid under reverse charge.
 

Are any freight services exempt from GST?
Yes, transport of items like food grains, salt, milk, and relief materials is exempt.
 

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