GST on Freight Charges: Transportation of Goods

Freight charges are a vital part of transporting goods across the country. Whether you’re a business owner or a logistics provider, understanding the gst on freight charges is essential for proper billing and tax compliance. In this blog, we’ll simplify how GST applies to goods transportation services and what rates are applicable.

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    GST Rates

    Is GST Applicable on Freight Charges?

    Yes, GST is applicable on freight charges when the service is provided by a Goods Transport Agency (GTA). A GTA is any person or business that provides transport services in goods carriages and issues a consignment note.

    If there is no consignment note issued, the service is not treated as GTA service, and different tax rules may apply.

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    GST Rates for Freight Services

    Service Type GST Rate Input Tax Credit (ITC)
    GTA charging GST (forward charge) 12% Allowed
    GTA charging GST (forward charge, optional) 5% Not allowed
    Recipient pays GST (reverse charge mechanism) 5% Recipient cannot claim ITC

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    Who Pays GST on Freight Charges?

    • If the recipient is a registered business, they may have to pay GST under Reverse Charge Mechanism (RCM).
    • If the GTA opts to pay GST, then the recipient does not need to pay under RCM.

    Freight Charges in GST Invoice

    • Included in the product price: GST is applied on the total invoice.
    • Shown separately: GST is charged on freight as a separate service.

    If you’re a seller arranging transportation and billing your customer for freight separately, you must apply the applicable freight charges gst rate on that amount.

    GST Exemption for Transport of Certain Goods

    Some goods are exempt from GST when transported by road by a GTA. These include:

    • Milk
    • Salt
    • Fruits and vegetables
    • Food grains and pulses
    • Relief materials for natural disasters

    In such cases, no GST is charged on the freight cost.

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    Input Tax Credit (ITC) on Freight GST

    • 12% GST (forward charge): Input Tax Credit is allowed
    • 5% GST (forward charge): No ITC allowed
    • 5% GST (RCM): No ITC to the transporter, and recipient cannot claim ITC

    So, choosing 12% GST under forward charge is better if the transporter wants to avail of ITC.

    Conclusion

    Understanding the gst on freight charges helps businesses stay compliant and manage costs efficiently. Whether you’re charging your customer for freight or paying a transporter, knowing the correct freight charges gst rate and who’s liable to pay makes all the difference.

    Frequently Asked Questions (FAQs)

    • What is the standard GST on freight charges?
      Freight charges by a Goods Transport Agency (GTA) attract 5% (no ITC) or 12% (with ITC), depending on the option chosen.
    • Who pays GST under reverse charge?
      If a registered business uses a GTA under the reverse charge mechanism (RCM), the business is liable to pay GST.
    • What are freight charges in GST invoices?
      Freight charges can be either included in the product price or shown separately with applicable GST.
    • Is GST applicable to courier services?
      Yes, courier services attract 18% GST and are eligible for ITC. They are not classified as GTA.
    • Can a transporter claim ITC on freight?
      Only if the transporter opts for 12% GST under forward charge. No ITC is allowed under the 5% option.
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