Transport Sector

Taxation on transport sector at a national level will result in

  • more efficient cross-state transportation
  • less paperwork for road transporters
  • bringing down logistics costs

Presently, all 29 states collect taxes at different rates on goods that move across their borders. As a result, tax on freight is collected multiple times. Also, there are long delays at interstate checkpoints owing to review by state authorities who examine and apply the relevant taxes and other levies. Truck delays are an average 5-to-7 hours at interstate checkpoints. The planned GST system for transport sector seeks to replace around 15 state and federal taxes and tariffs for a single tax at the point of sale. GST will, thus, score over the existing regime in the transport sector.

Roadways

  • Cab rides could get marginally cheaper for customers. The incidence of tax will come down to 5% from 6% for bookings made on cab aggregators like Ola and Uber.
  • 100% tax will be payable by E-commerce aggregator under reverse charge mechanism for service of Radio taxi or Passenger Transport Services provided by a Taxi driver or Rent-a-cab operator to any person.
  • Moreover, buses (including mini-buses) and pick-up vans, carrying more than 10 individuals, will be subject ed to no extra cess.

Airways

Under the new regime,

  • The tax rate for economy class flight tickets lowered to 5%.
  • Business class tickets will attract a higher tax at 12%.

Comparison of Prices

With this reduction in rates on domestic air travel, budget traveling will clearly get better.

Example – Economy Class base fare – Rs. 2000

transport and logistic sector

However, business class travel is going to get costlier with a marginal increase from 9% to 12%.

Example – Business Class base fare – Rs. 8000

transport and logistic sector

A frequent flier will definitely find the impact of GST on air fares. Also, the reduction in tax rates is a positive development for low-cost domestic carriers as a major portion of the revenue generated from airlines comes from economy travelers.

  • Airlines can only claim Input Tax Credit on input services for the economy class.
  • But for the business class, they can claim ITC for only spare parts, food items, and other inputs, apart from fuel.

Railways

The transport sector is the most crucial part of a business chain. Roadways will have an advantage in GST on short distances while Railways will se the impact on long distance travels.

  • Non AC train travel (including in local trains and metro) has been exempt
  • AC train travel will attract 5 %. Ticket prices for AC trains will increase marginally as current service tax is at 4.5 %.
  • The rate is kept low as they will not be allowed Input Tax Credit

Exemptions under railways

  • Travelling in metro;
  • Local trains; and
  • Religious travel including Haj yatra

Waterways

GST will be applicable on –

  • Transport of coastal goods;
  • Transport through National waterways; or
  • Transport through Inland waterways services

Exemptions under Transportation

Transportation by:

  • Road except the services of—
  1. a goods transportation agency; or
  2. a courier agency.
  • Inland waterways – Transport of passengers
  • Air, going to or coming from airport located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra (West Bengal)
  • Non-AC contract carriage other than

Radio taxi or for the Transportation of passengers (excluding tourism, conducted tour, charter or hire)

  • Non-AC horse carriage

Conclusion

Under GST, Transport sector is closely monitored and the tax rates are apt. Transportation sector has accepted the changes made under GST by the government of India.

In case you are confused about GST as a business owner, feel free to consult the GST experts at LegalRaasta. You can get comprehensive assistance on GST Registration online and GST Return. You can also use our GST software Online for doing end-to-end GST compliance.