Explainer: How India’s New GST Slabs Reshape Road Freight Economics

India’s revamp of the Goods and Services Tax (GST) regime with three uniform slabs of 5%, 18% and 40% is expected to alter cost structures across the logistics sector, according to a note from Crisil Intelligence.

Lower Levies For Multimodal Logistics

The biggest relief has come for exporters, with the tax on multimodal logistics services cut to 5% from 12%. This will directly bring down operational costs for companies moving goods through multiple modes of transport, Crisil Intelligence stated in its impact report released on Thursday, sectors reliant on international trade such as from automotive suppliers  are expected to see tangible savings on freight bills.

Third-party insurance on goods carriages will also become less burdensome, with the GST rate reduced to 5% from 12%.  This will translate into lower operating costs for transporters, particularly in an environment where fuel and financing overheads remain elevated.

Small Operators Insulated, Large Fleets Adjust

For small fleet operators, the continuation of the 5% GST regime without input tax credit (ITC) means little change. Their tax position stays neutral, allowing them to keep services competitive without additional compliance strain.

Large fleet operators (LFOs), however, face a shift. Under the new regime, they will pay 18% GST with ITC, compared with the earlier 12% with ITC. What it means is that while the higher tax rate will be creditable, in the short run, there could be liquidity pressures as the input credit cycle balances out. Purchases of new trucks or spares may be delayed in the near term as companies adjust their cash flows.

While the new tax structure simplifies compliance by consolidating slabs, its immediate impact will differ across fleet sizes. Export-driven businesses stand to benefit quickly from cost reductions, while LFOs will need to manage short-term credit adjustments. In the longer run, analysts suggest that the rationalisation could bring more predictability to freight economics and accelerate formalisation in the road transport segment.