The 56th GST Council meeting held on 3rd September 2025 introduced a series of rate rationalisations affecting the logistics sector. With the 12% and 28% GST rate slabs going away, there has been an impact on not only transportation services (public transportation and transportation of goods, where the earlier optional rate of 12% with ITC has moved to 18% with ITC), but has also impacted vehicle taxation, which will not only reduce procurement cost but also help offer services at better rates for transportation / rental services and provide flexibility in business models. The revised rates will come into effect from 22nd September 2025.
Impact on logistics sector:
- Significant cost savings on purchases: Reduction in GST rate on purchase of trucks for goods transportation and buses, motor vehicles for passenger transportation will significantly reduce the upfront investment required on purchase. There will be a 10% savings on upfront cost (in case ITC is not availed) or working capital savings, which will help transporters to make further purchases.
- Further, where the logistics service providers opt to provide service at 5% without ITC, they will be able to offer reduced prices in future due to reduction in capital costs.
- High GST rate of 18% on goods transportation may be a dampener for service recipients, leading to accumulation of ITC for recipients: Where the earlier option of 12% was available with input tax credit, the same has been proposed to be increased to 18% with ITC. Most of the finished products consumed by common man like FMCG, food and beverages, medicines, textile etc. now attract GST of 5%. These manufacturing sectors are already staring at ITC accumulation since most are in inverted tax structure, and any increase in GST rate on transportation services provided to these sectors will only aggravate the ITC accumulation further.
- High GST rate of 18% on passenger transportation may increase cost of services: Where the earlier option of 12% was available with input tax credit, the same has been proposed to be increased to 18% with ITC, thus potentially increasing the cost of services provided and offsetting any benefit that may have been available from purchase of buses / motor vehicles.
Key Changes:
GST rate on Goods Transport Agency (GTA) / pipeline transport / multimodal / passenger transport / rental service with fuel – 5% with restrictions on ITC or 18% with ITC (instead of earlier 12%)
- Goods Transport Agency (GTA) Services:
GTA services has been attracting 5% GST without ITC under both RCM and FCM, or 12% GST with ITC. Now, with 12% GST rate being done away with, the option of 12% with ITC has been increased to 18% with ITC.
- Supply of transportation of natural gas, petroleum crude, motor spirit, high speed diesel or ATF through pipeline also now attracts 18% with ITC or 5% without ITC.
- Supply of Passenger transport by any motor vehicle where fuel cost is included, will now attract 18% with ITC, or 5% with ITC limited to that on input services in same line of business.
- Supply of Renting of any motor vehicle (with operator) designed to carry passengers where the cost of fuel is included in consideration, will now attract 18% with ITC, or 5% with ITC limited to that on input services in same line of business.
- Thus, in all the above cases, the option of 12% with ITC is moved to 18% with ITC.
GST rate has been changed from 12% with ITC to 18% with ITC for supply of Air transport of passengers in other than economy class.
GST rate has been changed from a single rate of 12% with ITC to dual structure – 5% GST without ITC or 18% with ITC for the following:
- Supply of transport of goods in containers by rail by other than Indian Railways:
- Multimodal Transport
Revised: 5% GST without ITC where no leg of transport is through air, or 18% GST with full ITC
- Renting of Goods Carriage (with Operator)
- Container Train Operators (CTOs)
GST rate on purchase of trucks / buses / motor vehicles has been changed from 28% (with applicable cess) to 18% for the following:
- Motor vehicles for the transport of ten or more persons, including the driver (other than buses for use in public transport, which exclusively run on Bio-fuels which is already at 18%).
- Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 8702), including station wagons and racing cars.
- Motor vehicles for the transport of goods (other than Refrigerated motor vehicles which is already at 18%).