Transport is essential to the growth of the economy. Infact, our country relies on transport on a daily basis to function. Various goods have to be supplied to different parts of the country, and this doesn’t just help companies make profit, but also ensures that supply is running to both urban and rural parts of India.
Since this is a huge feat, it is only natural for the government to levy taxes in order to keep the functions running smoothly and maintain the cash flow. However, the various amounts of taxes on goods were nothing but a hindrance in the growth of companies.
Hence, introduced in 2006, GST was considered as a game changer in the industry. It was implemented in 2010 and it changed the facets of finance. Since then, GST has become the norm for every company/service and the same can be said for transport.
What Is GST And Is It Applicable On Transport?
The Goods and Services Tax is an indirect tax that is used in the supply of various goods and services in India. Under GST, a company has to pay a certain amount of tax if they wish to do business. It is a very comprehensive tax because it subsumed various indirect taxes, except a few state taxes, into one. Now unlike before where a company had to pay multiple taxes on business, they can now just pay the GST and fulfil their duty.
To answer the second question above, yes GST is charged on transportation. There are separate norms that impact both transport and logistics services under GST.
And while it is applicable on most transport facilities, there are exemptions for certain services and service providers. Like all transport services by road are exempt from GST, but if you are a GTA (Goods Transport Agency) or a courier service then you will be taxed even if you use roadways.
What Is A GTA?
According to Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017, “goods transport agency” or GTA means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. This means that anyone can hire a transport service but the only ones holding a consignment note are considered as GTA.
What Goods Are Exempt/Charged NIL From GST?
All modes of transport- rail, airways, road, waterways incur GST. Here are some of the services that are exempt under Goods and Service Tax.
- Relief materials for natural calamities, mishaps, accidents etc
- Foods grains like pulses, rice, salt, flour, milk and more
- All kinds of agricultural products and organic manure
- Military defense equipment
- Newspapers and Magazines registered under Registrar of Newspapers
- If gross amount charged for goods transport is under Rs.1500
- Transport of personal or household goods
- Transport of goods of unregistered person
What Goods/Services Are Charged Under GST For Transport?
- 5% GST levied if ITC is not availed
- 12% GST if ITC is availed
- 18% GST is applicable on rental services including trucks (with or without an operator)
- 18% GST is applicable on rental services of freight aircraft (with or without operator)
- 18% GST is applicable on rental services of water vessels including freight vessels (with or without operator)
These rates are prone/bound to change as per the movement of the economy. Hence, it’s always a good idea to keep an eye on any update.
So what’s the impact of GST on logistics services and transportation? Well a lot has changed. Things have become more systematic, logistics services have seen more opportunities due to the growth and reform of the supply chain sector. Since companies don’t have to pay multiple taxes, they have redesigned their supply chain for more efficiency and a wider reach. This is beneficial for logistics firms because:
- There has been an ease in movement of goods
- Companies don’t need to have warehouses in every state due to uniform taxing
- Introduction of E-Way bill has made documentation more easy
There are various other pros and cons of GST and that will be extensively covering them in our blogs so don’t forget to stay tuned.