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India’s transportation and logistics insights: GST reforms, infrastructure and deal trends

24 Dec 20255 min read

India’s transportation and logistics sector has undergone a phase of structural transformation in 2025, driven by policy reforms, accelerated infrastructure commissioning, and expanding digital integration. These forces are converging to shape a system that is increasingly connected, resilient, and competitive. Yet, even as momentum builds, the sector stands at a critical crossroads: the next phase of progress will be judged not by capacity created, but by interoperability achieved.

Contents

Decoding GST: Implications for freight, passenger, and multimodal transport

The GST Council’s recent announcements have once again placed the transportation and logistics sector at the centre of India’s evolving indirect tax framework. Given the sector’s role as the backbone of trade and commerce, the nuances of GST treatment on passenger and goods transportation, multimodal services, and rental arrangements have far-reaching implications for operators, shippers, and end customers alike.

Service category	GST rates	Input tax credit (ITC) availability
Passenger transport by first class rail or AC coach, economy class in air	5%	With ITC of input services
Passenger transport by air in other than economy class	18%	With ITC
Passenger transport by motor vehicle including fuel cost	18%	With ITC
Passenger transport by motor vehicle including fuel cost	5%	With ITC of input services
Transport of goods by rail	18%	With ITC
Transport of goods by rail	5%	With ITC of input services
Transportation of goods by goods transport agency (GTA) or natural gas, petroleum crude, motor spirit, HSD or ATF through pipeline	18%	With ITC
	5%	Without ITC
Multimodal transport (including air) of goods within India	18%	With ITC
Multimodal transport (excluding air) of goods within India	5%	Without ITC
Renting of passenger motor vehicle, goods carriage with fuel and operator	18%	With ITC
	5%	With ITC of input services

What it means for the transportation industry

Credit-linked cost planning

Dual GST rates for GTA and multimodal transport require modeling scenarios. ITC-eligible slabs raise upfront tax but improve recoverability; lower rates block credits.

Multimodal adoption challenges

Differential ITC treatment - excluding airless multimodal routes, creates cost asymmetry, slowing uptake in coastal shipping and rail-road connectivity.

Energy logistics efficiency

ITC benefits for pipeline transport reduce costs for energy-intensive sectors and support cleaner bulk movement.

Procurement & pricing implications

Contracts ignoring ITC pass-through risk hidden costs; freight rates may vary 5–12%, impacting pricing, margins, and modal choices.

Roadmap for businesses

New GST rates affect pricing, cash flow, and contracts. Companies must plan short, medium, and long-term actions for cost efficiency and compliance.

Bottom line: GST aims to expand ITC while protecting revenue. Industry seeks uniform ITC to accelerate multimodal growth.

Deals landscape

India’s transport and logistics sector saw 48 deals in 2025, a 37% increase from 2024’s 35 deals, but overall values moderated to USD 962 million. The shift reflects a year where capital deployment prioritised operational resilience and technology adoption over large-ticket consolidation. Domestic transactions continued to anchor volumes, while cross-border activity remained selective but strategically significant. Despite a softer value environment, the uptick in volumes suggests a sector recalibrating toward efficiency-led growth and digital-first business models.

From building infrastructure to orchestrating interoperability

India’s logistics sector is moving from physical expansion to creating interoperable, digitally connected systems that synchronize movement across roads, railways, ports, and waterways. This shift -from infrastructure creation to orchestration -could reduce logistics costs from 13–14% of GDP to near global benchmarks of 8%, positioning India as a supply chain hub.

Journey so far: From vision to execution

Early reforms focused on infrastructure: Sagarmala (port-led development), Bharatmala (highways), and Dedicated Freight Corridors (DFC). Between 2014–2020, highways expanded to 132,000 km and major port capacity grew 65%. GST, E-Way Bill, and FASTag streamlined road movement, while the National Infrastructure Pipeline committed INR 111 lakh crore through FY2025.

The integration push began with PM Gati Shakti (2021) and National Logistics Policy (2022), unifying 16 ministries on a shared platform. The Unified Logistics Interface Platform (ULIP) now connects 125 APIs, enabling digital interoperability.

Economic impact: Efficiency and modal rebalancing

Modal share is shifting:

Road freight: 72% → ~60% by 2030
Rail freight: 27% → 40% by 2035 via DFC
Waterways: 5% → ~8% with new terminals under Jal Marg Vikas

This supports India’s Green Freight Strategy, targeting a 45% CO₂ intensity cut by 2035.

Where India stands today

85% of DFC track commissioned
Five multimodal logistics parks (MMLPs) in advanced stages
Highway capex up 67% since FY2020

The challenge: interoperability. Gati Shakti provides the backbone, but success depends on private adoption of ULIP APIs, common KPIs, and synchronised corridor planning.

Mindset shift: From building to orchestrating

The next phase is about intelligent operations, not just construction:

Align investments via Gati Shakti’s geospatial tools
Foster PPP 2.0 for terminals and digital infrastructure
Prioritize reliability over cost
Leverage AI, IoT, and predictive analytics for efficiency

Infrastructure must be seen as a living network, not isolated projects.

The outlook: From infrastructure build-out to infrastructure intelligence

India’s logistics sector has reached a defining inflection point. The physical backbone - corridors, terminals, ports, and tunnels, is largely in place. The digital layer - ULIP, Gati Shakti, and the National Logistics Policy, is operational. The next decade will focus on integration, coordination, and optimisation.
If India sustains its current trajectory, logistics costs could fall from 13% of GDP to the global benchmark of 8%. Road dependency may drop from 72% to nearly 50%, creating a digitally synchronised, multimodal logistics ecosystem, a system that moves at the speed of data, not just the speed of roads.

This is the true essence of India’s logistics revolution: shifting from building more to connecting better.

Freight Forward - December 2025

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