Impact of GST Rates on Road Transport

Road transport is the most popular mode of transporting goods from one location to the other. Quicker delivery over shorter distances makes road transport quite efficient. 

 

The Indian road network is the second largest in the world and is spread over 6.3 million kilometres. The vehicle volume is also huge, around 22.9 million units. With such a mammoth road transport system, it has been an equally gigantic effort to bring the whole country into a single system of taxation. The GST tax structure was implemented in 2017. 

 

To understand the GST rate on transport of goods by road, it is important to also understand the various aspects of GST on road transport. Read on to learn all about this tax regime and its impact on transport. 

Before GST was implemented, each state had its own taxation system. Each state used to levy tax on goods that moved across their borders. As every state had a different tax structure, the state authorities used to review and examine freight and thereafter apply the relevant taxes and other levy rates. It resulted in multiple taxations and also caused long delays at the inter-state checkpoints.  

 

The following table shows a few instances of the road tax on goods carriages in some of the Indian states, in the pre-GST Regime (in the year 2015): 

[with Laden Weight or Gross Vehicle Weight 10,000 kg (10 M.T.), Carrying Capacity 8,000 kg (8 MT), and Cost Price ₹10 lakhs]

Unlike the other transportation modes, road transport attracts a different rate of GST on transport of goods by road. The GST system replaced several taxes and tariffs at the point of sale. The introduction of the GST regime has led to higher competitiveness, more efficient sourcing and organised trucking. Take a look at the road transport costs that are now applicable:

Roads play an important role in every country’s economy. According to the National Highways Authority of India, NHAI, Indian roads carry 65% of freight and 80% of passenger traffic. Keeping this in mind, the GST tax regime is applicable only to the GTAs, that is the Goods Transport Agencies. 

 

GTAs include any individual who offers transport services for ferrying goods and issues consignment notes. A consignment note is an official document that is released by a GTA against the receipt of goods. It is issued for the purpose of transporting the goods by road in a goods carriage. The issuance of a consignment note states that the lien on the goods has been assigned to the transporter. The transporter now stands responsible for the safe delivery of the goods to the consignee. 

 

The following services are provided by a GTA:

• Packing

• Unpacking 

• Loading

• Unloading

• Temporary warehousing.

There are certain provisions that the government has made for exemptions on the GST on road transportation. Let us take a look:

• Transportation of household goods

• Transportation of goods by unregistered individuals

• Transportation of relief materials for accidents, mishaps, and natural or man-made disasters

• Transportation of military equipment

• Transportation of food grains, milk etc

• Transportation of agricultural products, including manure

• Transportation of Registrar of Newspaper-registered magazines and newspapers

• Transportation of goods where the gross amount charged is under INR 1,500.

GST has been able to bring significant changes to the road transport industry. Crossing the interstate borders is no longer an ordeal. The implementation of GST on the transportation of household goods by road has been greatly helpful in reducing the time lag. It has also helped in making the delivery of goods faster and better. That's not all. The trucking industry has also been able to increase the number of trips and ultimately added to the productivity of the entire road transport industry.