Freight tax cut to drive logistics

The GST Council has eased the tax burden on freight services, a move expected to soften logistics costs for industry. Taxes on multimodal transport within India, excluding air legs, have also been cut to 5% from 12%.

Lower rates are likely to reduce door-to-door cargo charges, particularly for exporters. Transport of goods in containers by rail, other than Indian Railways, will now be taxed at 5% without input tax credit (ITC), which lets businesses offset GST paid on inputs, or 18% with ITC.

Earlier, this was taxed at 12% with ITC. For road haulage, renting of goods carriages with operators, where fuel is included, now attracts 5% instead of 12%. Third-party insurance of goods carriages too moves down to 5% from 12%, reducing vehicle running costs for fleet operators.

Goods Transport Agency services, widely used in bulk cargo movement, have been revised from 5% without ITC or 12% with ITC to 5% without ITC or 18% with ITC. No Compensation Cess applies to these categories.

The revisions are expected to trim operating costs for transporters and improve efficiency in the movement of goods, even as firms weigh the trade-off between lower rates without ITC and higher slabs with credit.