GST on Freight & Goods Transport in India (2026 Guide)

What is a Goods Transport Agency (GTA)?

Most commercial road freight in India is supplied by a Goods Transport Agency — an entity that issues a consignment note (lorry receipt) for the goods it transports. The GTA classification matters because it determines how GST is charged and who pays it.

GST rates on freight: 5% vs 12%

A GTA generally has two options. It can charge 5% GST without claiming Input Tax Credit on its own inputs — commonly settled under the reverse charge mechanism where the recipient pays the tax. Alternatively, it can opt for 12% GST under forward charge and claim ITC. The right structure depends on the parties involved and the volume of input credits.

• 5% GST — typically without ITC to the GTA; often under reverse charge
• 12% GST — forward charge, with ITC available
• Certain transport (e.g. specified exempt goods) may be exempt

Reverse charge (RCM) and Input Tax Credit

Under reverse charge, specified recipients (such as registered companies and firms) pay the GST directly to the government instead of the transporter, and can usually claim it back as Input Tax Credit if the freight is used for business. This keeps freight tax-neutral for compliant businesses while ensuring the tax is collected.

Section 194C TDS on transport payments

When a business pays a transporter, it may need to deduct tax at source under Section 194C — commonly 1% where the payee is an individual or HUF and 2% for other entities, subject to threshold limits. Transporters who furnish a valid PAN and meet the small-operator conditions may be exempt from TDS. Because these rules and thresholds change, always confirm the current position with a chartered accountant.