GST on Freight Charges in India: Everything You Need to Know

If you run a business that ships goods across India or if you are a transporter, logistics provider, or importer, understanding GST on freight charges is absolutely non-negotiable. Making a mistake will result in fines, disrupted ICT, and headaches in compliance.

We provide business with an understanding of GST at SGL 306. We have discussed freight charges, GST rates applicable, freight charges HSN code, freight charges SAC code, reverse charge mechanism, ITC eligibility and many more in this detailed guide.


What Are Freight Charges?

In simple terms, freight charges meaning refers to the fee paid for transporting goods from one location to another — whether by road, rail, sea, or air. These charges are paid by the consignor (sender) or consignee (receiver) to the transporter or logistics service provider.

Freight charges can include:

  • Basic transportation cost
  • Fuel surcharge
  • Loading and unloading fees
  • Toll charges (if included in the invoice)
  • Packaging and handling (if part of freight service)

Once you understand what freight charges are, the next question naturally is does GST apply, and at what rate?


Freight Charges HSN Code and SAC Code

Under GST, services are classified using freight charges SAC code (Service Accounting Code), while goods use HSN (Harmonised System of Nomenclature). Since freight is a service, a SAC code applies not an HSN code. However, many businesses search for freight charges HSN code since the terms are often used interchangeably

Freight Charges in GST - Applicable Rates

Understanding freight charges in GST requires knowing which type of transport service you are dealing with. The GST Council has prescribed different rates for different modes and service types.

Service Type SAC Code GST Rate ITC Available?
Goods Transport Agency (GTA) — 5% option 9965 5% No
Goods Transport Agency (GTA) — 12% option 9965 12% Yes
Road transport (Non-GTA, individual truck owners) 9965 Nil No
Rail freight (Indian Railways) 9965 5% No
Air freight (domestic) 9965 18% Yes
Coastal / Inland waterways freight 9965 5% No
Courier services 9967 18% Yes
International freight (export) 9965 Nil / Zero-rated Eligible for refund

What is the Goods Transport Agency (GTA)?

Any person who issues a consignment note and is responsible for road transportation of goods is a GTA. Not all transporters are also GTA - the most important distinguishing factor is the consignment note. In the case that a consignment note is not issued, the transporter is not a GTA and GST rules are varied.


Reverse Charge Mechanism (RCM) of Freight

Reverse Charge Mechanism (RCM) is one of the least comprehended features of GST on freight charges. With RCM, the beneficiary of the service (not the supplier) pays GST to the government.

When Does RCM Apply on Freight?

RCM applies to GTA services when the GTA is providing services to registered persons. In such cases, the registered recipient pays GST under RCM rather than the GTA collecting and paying it.

Recipient Type GTA GST Liability RCM Applicable?
Registered business (GST registered) Recipient pays under RCM Yes
Unregistered individual / consumer GTA pays GST (if liable) No
GTA opts for 12% with ITC (forward charge) GTA pays directly No (Forward Charge)

ITC (Input Tax Credit) on Freight Charges

Whether you can claim Input Tax Credit (ITC) on freight charges under GST depends on the rate opted and the nature of the service:

  • 5% GTA (RCM): GST paid under RCM at 5% — ITC is not available.
  • 12% GTA (Forward Charge): ITC is available if used for business purposes.
  • Air freight (18%): ITC available.
  • Courier services (18%): ITC available.
  • Rail freight (5%): ITC is generally not available.

At SGL 306, we always advise businesses to evaluate whether opting for 12% (with ITC) is more cost-effective than 5% (without ITC), especially for high-volume freight businesses.


GST Exemptions on Freight Charges

Not all freight is taxable. The following are exempt from GST:

  • Transport of agricultural produce
  • Transport of milk, salt, food grains, pulses, and flour
  • Transport of organic manure
  • Transport where total freight amount is less than ₹1,500 per consignment
  • Transport where individual consignments weigh less than 750 kg
  • Transport by a GTA where the gross amount charged is less than ₹750 for a (single carriage)

How to Show Freight Charges on a GST Invoice

If you are a seller adding freight charges to your customer's invoice (as part of your supply), here is how it works:

  • 1. Freight charges included in the price of goods — GST applies at the rate of the goods.
  • 2. Freight charged separately on the invoice — it may be treated as a composite supply (taxed at the rate of the principal supply) or a mixed supply (taxed at the highest applicable rate).
  • 3. If freight is invoiced by a separate logistics company, that company's invoice governs the applicable GST rate and SAC code.

Practical Example: Calculating GST on Freight

Let's say your company in Coimbatore ships goods worth ₹1,00,000 to a customer in Mumbai. The freight cost charged by the GTA is ₹5,000.

  • If GTA opts for 5% (RCM): You (the recipient) pay ₹250 as GST under RCM. No ITC credit.
  • If GTA opts for 12% (Forward Charge): GTA charges ₹5,600 (₹5,000 + ₹600 GST). You can claim ₹600 as ITC.

For most businesses dealing in taxable goods, the 12% forward charge option often results in net savings after ITC utilisation.