New GST on Freight Charges: Transportation of Goods
Quick Summary
- The new GST rates for freight services in India are 18% with full ITC, 5% with restricted ITC, and 5% under the reverse charge mechanism with ITC available to the recipient.
- GST applies to freight charges when services are provided by a Goods Transport Agency (GTA) with a consignment note.
- The recipient pays GST under the reverse charge mechanism if they are a registered business, unless the GTA opts to pay GST.
- Some goods like milk, salt, and food grains are exempt from GST when transported by road by a GTA.
- Choosing the 18% GST rate allows transporters to claim full input tax credit, while the 5% rate does not.
Freight charges are a vital part of transporting goods across the country. Whether you’re a business owner or a logistics provider, understanding gst on freight is essential for proper billing and tax compliance. In this blog, we’ll simplify how GST applies to goods transportation services and which rates apply.
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New GST on Freight / GTA Services in India
Goods Transport Agency (GTA) services continue to have a dual-rate structure after 22 Sep 2025. The key change is that the earlier 12% forward-charge option is rationalised to 18% with full ITC. The concessional 5% route continues, and the reverse charge on GTA also continues at 5% for notified recipients.
A GTA opting for 5% forward charge cannot take ITC on inputs and input services used for that supply, while a GTA opting for 18% forward charge can take full ITC. Also, GST paid by the recipient under RCM is eligible for ITC, subject to normal conditions.
GST Rates for Freight / GTA Services
| Service Type | New GST Rate (After 22 Sep 2025) |
Old GST Rate (Before 22 Sep 2025) |
Input Tax Credit (ITC) |
|---|---|---|---|
| GTA charging GST (forward charge - standard) | 18% | 12% | Allowed in full |
| GTA charging GST (forward charge - concessional) | 5% | 5% | Not allowed to GTA on inputs and input services used for this supply |
| Recipient pays GST under reverse charge (RCM) | 5% | 5% | Recipient can generally claim ITC of tax paid under RCM, subject to normal conditions |
Notes: The earlier 12% option is rationalised into 18% (with ITC). The 5% concessional route remains with restricted ITC. RCM at 5% continues, with ITC available to the recipient when used for taxable business supplies.
(After 22 Sep 2025) 18%
(Before 22 Sep 2025) 12%
(After 22 Sep 2025) 5%
(Before 22 Sep 2025) 5%
(After 22 Sep 2025) 5%
(Before 22 Sep 2025) 5%
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 a GTA service, and different tax rules may apply.
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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. In such cases, no GST is charged on the freight cost. These include: milk, salt, fruits and vegetables, food grains and pulses and relief materials for natural disasters
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How to Calculate GST on Freight / GTA Services
GST on freight or GTA services is calculated on the taxable freight amount charged for transportation. The applicable rate depends on whether the supply is billed under forward charge or reverse charge, and whether the GTA is using the 18% standard option or the 5% concessional option.
GST Amount = Freight Value × GST Rate
Total Invoice Value = Freight Value + GST Amount
Example 1: GTA charging 18% under forward charge
Suppose the freight amount is Rs 20,000.
GST = 20,000 × 18% = Rs 3,600
Total Invoice Value = 20,000 + 3,600 = Rs 23,600
This applies where the GTA chooses the 18% forward charge option and wants to claim full ITC.
Example 2: GTA charging 5% under forward charge
Suppose the freight amount is Rs 20,000.
GST = 20,000 × 5% = Rs 1,000
Total Invoice Value = 20,000 + 1,000 = Rs 21,000
This applies where the GTA chooses the 5% concessional forward charge option. Under this route, ITC on inputs and input services used for that supply is not available to the GTA.
Example 3: Recipient paying 5% under reverse charge
Suppose the freight amount is Rs 20,000 and GST is payable by the recipient under RCM.
GST = 20,000 × 5% = Rs 1,000
Total freight cost = 20,000 + 1,000 = Rs 20,000
GST paid separately by the recipient under RCM = Rs 1,000
If the freight service is used for taxable business purposes and the normal GST conditions are met, the recipient can generally claim ITC of the tax paid under RCM.
Input Tax Credit (ITC) on Freight GST
- 18% 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 18% 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.
