GST on Freight Charges

Freight charges, in simple terms, can be said to be a charge paid for carriage / transportation of goods. Goods can be transported through any mode i.e. air, land or sea. Under the present article we would see the GST rates as applicable to freight charges, exemption list and fixing of the GST liability on freight charges.

GST RATE ON FREIGHT CHARGES –

The rate of GST on freight charges is 5%.

EXEMPTION LIST – GST ON FREIGHT CHARGES

Goods and Service Tax is not payable on the freight charges for the transportation of following goods –

1. Transport of agricultural produce;

2. Transport of milk, salt and food grains including flour, pluses and rice;

3. Transport of organic manure;

4. Transport of Defence or military equipment;

5. Transport of newspaper or magazine which are registered with the Registrar of Newspaper;

6. Transport of relief material which is meant for the victims of the natural or man-made disasters, accidents, calamities or mishaps;

7. Transport of goods, where the gross amount charged on a consignment transport in the single carriage is less than INR 1500;

8. Transport of goods, where the gross amount charged for transportation of all such goods for single consignee is less than INR 750.

FIXING OF THE GST LIABILITY ON FREIGHT CHARGES –

Generally, three parties are involved one is consignor i.e. the sender of the goods, second is the transporter i.e. GTA and third is the consignee i.e. the receiver of the goods.

In order to fix the GST liability, it is important to analyze the person who is receiving the freight service. The recipient of the freight service would be the one who is paying freight charges i.e. if the consignor (the sender of the goods) pays the freight charges to GTA, then, he will be the recipient of the freight service and thus the consignor would intend liable to pay the GST, however, if the freight charges are paid by the consignee (i.e. the receiver of the goods), then, he will be liable to pay the GST.

Generally, GST is payable by the service provider, however, in case of GTA, the GST on freight charges will be paid by either the consignor or the consignee, on the basis of the recipient of freight service, on a reverse charge basis, if they belong to any of the following specified category of person –

• A factory which is registered under the Factories Act, 1948;
• A society which is registered under the Societies Registration Act or under any other law;
• A co-operative society;
• A person registered under the Goods and Service Tax Act;
• A body corporate;
• A partnership firm;
• An Association of persons;
• A casual taxable person.

The above specified categories of persons, if receives the freight service, are liable to pay GST on a reverse charge basis. The specified categories of persons are required to obtain registration under GST and it must be noted that the benefit of the threshold limit is not available to such specified categories of person availing the freight service.

It must be noted that if the recipient of the freight service does not fall within the above specified category, GTA would be liable to pay GST on freight charges. In such case, GTA has two options either to pay GST @5% without availing the benefit of ITC or to pay GST @12% and avail benefit of ITC.