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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
|
|
5%
|
With ITC of input services
|
|
|
Transport of goods by rail
|
18%
|
With ITC
|
|
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
|
Dual GST rates for GTA and multimodal transport require modeling scenarios. ITC-eligible slabs raise upfront tax but improve recoverability; lower rates block credits.
Differential ITC treatment - excluding airless multimodal routes, creates cost asymmetry, slowing uptake in coastal shipping and rail-road connectivity.
ITC benefits for pipeline transport reduce costs for energy-intensive sectors and support cleaner bulk movement.
Contracts ignoring ITC pass-through risk hidden costs; freight rates may vary 5–12%, impacting pricing, margins, and modal choices.
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.
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.
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.
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.
Modal share is shifting:
This supports India’s Green Freight Strategy, targeting a 45% CO₂ intensity cut by 2035.
The challenge: interoperability. Gati Shakti provides the backbone, but success depends on private adoption of ULIP APIs, common KPIs, and synchronised corridor planning.
The next phase is about intelligent operations, not just construction:
Infrastructure must be seen as a living network, not isolated projects.
This is the true essence of India’s logistics revolution: shifting from building more to connecting better.
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