GST on shipping and freight confuses even experienced businesses, because the same shipment can attract different rates depending on who is billing and how. The single most important question is this: are you billing the freight in your own name, or acting as someone's agent?
Principal or agent?
If you bill the customer for the freight in your own name and take responsibility for the transport, you are acting as a principal, and the freight rates below apply to you. If you only arrange things on behalf of a customer or a carrier and charge a fee for that, you are an agent, and your fee is usually taxed as a service at 18%.
The broad rates
| Service | GST rate | Input tax credit |
|---|---|---|
| Transport of goods by ship | 5% | Limited |
| Multimodal transport (sea plus road or rail) | 5% | Restricted |
| Multimodal transport including air | 18% | Full |
| Road goods transport agency | 5% or 18% | None at 5%, full at 18% |
| Agency, documentation, customs broker services | 18% | Full |
The choice between a lower rate with little credit and a higher rate with full credit matters. The right answer depends on how much GST you pay on your own costs.
Exports
Freight billed to a foreign customer can often be treated as a zero-rated supply under a Letter of Undertaking, so no GST is charged. Freight billed to an Indian exporter is a different case and is usually taxable.
Routine compliance to keep in mind
- A separate GST registration in each state where you have a place of business.
- Monthly or quarterly returns and the annual return.
- E-invoicing once your turnover crosses the limit.
- Reverse charge on certain inward services.
Please note: GST on shipping and freight has seen several rate changes, and there is no single clear instruction that settles every billing arrangement. The right rate and credit position turn on the exact terms of your contracts and how each invoice is raised, so the table above is a general guide and each business should be reviewed on its own facts.
Run a shipping, logistics, or freight business and not sure your GST is set up right? Get a quote and we will review how you bill and make sure your rates and credits are correct.
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