India’s logistics sector gets a boost as freight services tax slashed

India’s logistics sector gets a boost as freight services tax slashed

 The Indian government has taken a significant step to reduce logistics costs by cutting the Goods and Services Tax (GST) on freight and multimodal transport services — a move expected to ripple across supply-chains, exports and infrastructure.

What changed

The Goods and Services Tax (GST) rate on certain freight services has been lowered to 5 per cent from the earlier 12 per cent. 

Specifically:

Services covering multimodal transport (where goods are moved using two or more modes under one contract, excluding air legs) will now attract 5 per cent tax. 

Containerised goods transport by rail (outside the national railway operator) is taxed at 5 per cent without input tax credit (ITC) or 18 per cent with ITC — compared with 12 per cent earlier. 

Road haulage services (renting of goods carriages where fuel is included) and third-party insurance of goods carriages have likewise been reduced to 5 per cent from 12 per cent. 

Why it matters

Logistics costs in India have been among the highest in major economies, eating into manufacturing and export competitiveness. By lowering the tax on freight services, the government signals a stronger focus on reducing door-to-door cargo costs and enhancing the efficiency of supply-chains. Economic data show the move is particularly beneficial for sectors reliant on rapid multimodal transport: exporters, manufacturing hubs, and businesses using rail + road + port combinations. 

For fleet operators and transport service providers, the reduction also means lower input overheads — especially for small- and medium-sized transporters who may choose the 5 per cent rate (without ITC) to simplify compliance and improve margins. Meanwhile, larger operators who opt for the 18 per cent rate (with ITC) may face short-term cash-flow adjustments but stand to benefit over time. 

Challenges & caveats

The system still offers a trade-off: choosing the 5 per cent rate means no input tax credit, while the 18 per cent option (with ITC) may offer benefits—but the higher upfront tax burden could strain smaller operators. 

The cut applies only to freight services excluding air-legs, and primarily to services within India. Export legs involving multiple modes and overseas destinations may still face different tax/zero-rating rules. 

Infrastructure deficiencies (ports, inland waterways, last-mile connectivity) still persist; the tax cut is one piece of the puzzle. Without complementary logistics infrastructure investment, the full benefit may not be realised.

Outlook

In the medium term, the tax reduction is expected to enhance logistics competitiveness for India — lowering costs for exporters, encouraging more containerisation and multimodal transport, and nudging the economy closer to global freight-cost benchmarks. For listed logistics companies and large shippers, this could translate into margin improvement, more efficient asset usage, and faster throughput.

Conclusion 

cut of freight tax to 5 per cent for multimodal transport is the standout policy lever here — it goes beyond a mere rate change to reshape cost-structures in logistic chains.

Recommendation: For your LinkedIn audience, emphasise how this policy connects to broader themes: India’s ambition to become a global logistics hub, the “Make in India” competitiveness push, and the growing importance of multimodal corridors. Use a short case-study (for example, a manufacturing exporter or a multimodal freight operator) to bring the story alive. Also indicate what stakeholders (transporters, shippers, logistics real-estate developers) should watch next (e.g., uptake in container rail traffic, impact on coastal shipping, and whether the savings are passed on).