GST On Freight Charges: Rates, RCM, and Invoicing in 2026

Key Takeaways

GTA, consignment note test: A transporter becomes a Goods Transport Agency only when a consignment note is issued; without it, the service is exempt from GST, making this document decisive.
Freight on sales invoices: Freight charged on FOR or CIF sales is part of the goods value under Section 15, taxed at the goods rate as a composite supply under Section 8.
RCM at 5% in FY 2026–27: GTA services to notified recipients attract 5% under reverse charge; the recipient pays, unless the GTA has opted for forward charge at 12% for the year.
Forward charge option: A GTA opting for 12% forward charge via Annexure V before the year’s start is locked in for that year; if not opted, RCM applies throughout the year.
ITC on RCM in same period: Declare RCM in GSTR-3B Table 3.1(d) and claim credit in Table 4(A)(3) in the same return; GSTR-2B reconciliation does not auto-pull these credits.

GST on freight is one of the most expensive line items to get wrong. Book the wrong rate or miss reverse charge mechanism (RCM) on a Goods Transport Agency (GTA) bill, and you face interest at 18% per annum plus potential ITC reversal, on every month you got it wrong.

GST on freight charges depends on three checks: whether the transporter issues a consignment note, who the recipient is, and whether freight is bundled into a goods supply. Get these right, and your invoices, RCM entries, and Input Tax Credit stay clean under the current rules in FY 2026–27.

GST On Freight Charges In An Invoice: The Short Answer

GST on freight charges in an invoice follows a three-way split: freight as part of a goods supply, freight from a GTA under RCM, or freight from a non-GTA transporter.

Freight on FOR or CIF sales invoice, composite supply — Part of goods value under Section 15, same as goods rate, seller charges buyer
GTA service to notified recipient, no forward-charge opt-in — RCM under Section 9(3), 5%, recipient pays
GTA opted for forward charge, Annexure V filed — Forward charge, 12%, GTA pays and charges on invoice
Non-GTA road transport, no consignment note — Exempt, Nil, not applicable
Transport of goods by air, domestic — Forward charge, 18%, transporter charges
Transport of goods by rail — Forward charge, 5%, Indian Railways charges
Ocean freight on CIF imports, post Mohit Minerals — Not taxable under RCM, Nil, no separate levy

The rule most teams get wrong: Freight on a seller’s invoice is not automatically a 5% GTA charge. If you are the seller and you arranged the transport, it is a composite supply taxed at your goods rate, unless you meet all four pure agent conditions under Rule 33.

Is GST Applicable On Freight Charges In Your Invoice?

Whether GST applies to freight on your sales invoice depends on who arranged the transport and how you contracted it, not merely whether you show freight as a separate line.

The Composite Supply Rule For FOR And CIF Sales

When you sell goods on a FOR or CIF basis, you are contracting with the transporter on your own account. The buyer pays you a bundled amount covering goods and freight. Under Section 8 of the CGST Act, 2017, this is a composite supply where the principal supply is the goods. The entire value, including freight, is taxed at the goods rate under Section 15 of the CGST Act.

Example: You sell industrial components at 18% GST. You charge ₹2,00,000 for goods and ₹10,000 for freight on the same invoice under a FOR contract. GST applies at 18% on ₹2,10,000, not 18% on goods and 5% on freight separately.

When Pure Agent Treatment Applies

If you arrange transport strictly as an agent of the buyer, you do not negotiate the rate, do not mark it up, and only pass through the exact transporter invoice, you may exclude freight from your supply value under Rule 33 of the CGST Rules, 2017. All four conditions must be met: you act as pure agent, you hold no title to the transport service, you do not use it for your own interest, and you recover only the actual amount paid. In practice, few sellers meet all four conditions, particularly the exact reimbursement test.

Place Of Supply For Freight Billed To Registered Buyers

Under Section 12(8) of the IGST Act, 2017, when the recipient of a transport service is registered, the place of supply is the recipient’s registered location. This determines whether you charge IGST or CGST plus SGST. If your buyer is registered in a different state, IGST applies.

Frequently Asked Questions About Freight On A Sales Invoice

If I show freight as a separate line on my invoice, can I charge it at 5%?

No, not automatically. If you sold goods on a FOR or CIF basis and arranged the transport yourself, the freight is part of the composite supply and taxed at the goods rate under Section 8 and Section 15 of the CGST Act, 2017. Showing freight as a separate line does not change the legal character of the supply. Only if you meet all four pure agent conditions under Rule 33 can you exclude freight from your supply value.

What if my buyer arranges their own transporter and I have no role in freight?

Then freight is entirely outside your supply. You charge GST only on the goods. The buyer’s transaction with the transporter is a separate supply governed by the GTA or non-GTA rules.

GST Rate On Freight Charges: GTA Vs Non-GTA, Forward Vs Reverse Charge

The GST rate on freight charges from a road transporter is 5% under RCM or 12% under forward charge, but only if that transporter is a GTA issuing a consignment note. If there is no consignment note, the transport is exempt.

GTA Under Reverse Charge: 5% Paid By The Recipient

Under Notification No. 13/2017-Central Tax (Rate) — 28 June 2017, Sl. No. 1, as amended, GTA services to the following recipients attract 5% GST under RCM:

Any person registered under CGST, IGST, SGST, or UTGST Acts
Any factory under the Factories Act, 1948
Any society under the Societies Registration Act, 1860
Any co-operative society established under any law
Any body corporate established under any law
Any partnership firm, including associations of persons
Any casual taxable person

The recipient computes and pays this 5% in cash. ITC of the same amount is claimable in the same period.

GTA Under Forward Charge: 12% Paid By The GTA

Since 18 July 2022, a GTA can opt to pay GST at 12% under forward charge per Notification No. 03/2022-Central Tax (Rate) — 13 July 2022. The GTA files Annexure V by 15 March of the preceding financial year per Circular No. 177/09/2022-GST — 3 August 2022. The GTA then charges 12% on its invoice and avails ITC on its inputs. Your RCM liability on that GTA’s bills is nil for that financial year.

Practical check: Ask every GTA vendor at the start of each FY whether they have filed Annexure V. If they have not, your company is in RCM territory for that year regardless of what their invoice says.

Non-GTA Transporters: Nil GST

Transport of goods by road by any person who is not a GTA, no consignment note, and not a courier agency is exempt from GST under Notification No. 12/2017-Central Tax (Rate) — 28 June 2017, Sl. No. 18(a). Book it as a pure expense with no GST.

GTA Exemptions: When Even A GTA Charges Nothing

The following GTA services are exempt from GST under Notification No. 12/2017-Central Tax (Rate) — 28 June 2017:

Consignment in a single carriage where total freight does not exceed ₹1,500
All goods for a single consignee where total freight does not exceed ₹750
Agricultural produce, milk, salt, food grains including flour and rice, organic manure, newspapers registered with the Registrar of Newspapers, relief materials for disaster victims, and defence or military equipment

Ocean Freight On CIF Imports: No Separate IGST

The Supreme Court in Union of India v. M/s. Mohit Minerals Pvt. Ltd., Civil Appeal No. 1390 of 2022 — 19 May 2022 held that no IGST is payable on ocean freight under RCM for CIF import contracts. The importer already pays IGST on the full CIF value of goods. A separate RCM levy on the freight component would be double taxation.

Frequently Asked Questions About GST Rates On Freight

My GTA supplier is unregistered. Do I still pay RCM at 5%?

Yes. RCM under Section 9(3) applies regardless of whether the GTA is registered. The recipient’s liability is triggered by the nature of the supply, not the supplier’s registration status. You will also need to issue a self-invoice under Section 31(3)(f) of the CGST Act since the supplier is unregistered.

What GST rate applies to domestic air freight?

Domestic transport of goods by air attracts 18% GST under Notification No. 11/2017-Central Tax (Rate), paid by the airline on forward charge. This is not an RCM item.

Does the ₹1,500 exemption apply per invoice or per consignment?

The ₹1,500 threshold applies per consignment transported in a single carriage. It is not per invoice. If two consignments move in the same truck and the combined freight exceeds ₹1,500, the exemption does not apply to either.

Accounting And Compliance: How To Book Freight RCM And Claim ITC

Getting GST on freight charges right in your books requires four steps: identifying the liability, raising the right documents, paying in GSTR-3B, and claiming ITC in the same period.

Documents You Must Have Before Booking

For GTA services under RCM, keep:

Consignment note from the GTA, confirms GTA status and liability
Self-invoice if the GTA is unregistered, mandatory under Section 31(3)(f)
Payment voucher at the time of payment to the GTA, mandatory under Section 31(3)(g) for all RCM supplies

The consignment note should show: names of consignor and consignee, vehicle registration, goods details, origin and destination, and who is liable to pay GST.

How To Report And Pay In GSTR-3B

Step 1: Calculate RCM liability: freight amount multiplied by 5%.

Step 2: Enter this liability in Table 3.1(d) of GSTR-3B.

Step 3: Pay the liability in cash through the electronic cash ledger.

Step 4: Claim ITC on this payment in Table 4(A)(3) of the same GSTR-3B, subject to Section 16 conditions.

Example: Your company receives a GTA bill of ₹50,000 in September 2026 from a transporter who has not filed Annexure V. RCM liability = ₹50,000 × 5% = ₹2,500. Declare ₹2,500 in Table 3.1(d), pay ₹2,500 in cash, and claim ₹2,500 ITC in Table 4(A)(3) of your September 2026 GSTR-3B.

GSTR-2B Does Not Help You Here

GSTR-2B auto-populates ITC only for forward charge supplies where your supplier has filed GSTR-1. It does not auto-populate RCM liabilities or the corresponding ITC credits. You must manually identify every GTA bill, compute the liability, and enter both sides in GSTR-3B. A missed RCM payment in a period accumulates interest at 18% per annum from the due date of that GSTR-3B.

ITC Eligibility And Restrictions

ITC on RCM paid for GTA services is eligible under Section 16 of the CGST Act, provided the service is used for business purposes and does not fall under blocked credits in Section 17(5). If the GTA service supports an exempt supply or a non-business use, you must apportion or reverse ITC under Section 17(2).

Frequently Asked Questions About Freight RCM Accounting

Can I use my ITC balance to pay the RCM liability on a GTA bill?

No. RCM liability must be paid in cash via the electronic cash ledger. Once paid in cash, the corresponding ITC is credited in the same period and can be used for future forward charge liabilities. Many finance teams automate this tagging and cash-ledger allocation using rules in AI Accountant.

If I forgot to pay RCM on a GTA bill from a previous quarter, what do I do?

Declare the liability in the current period’s GSTR-3B Table 3.1(d) and pay the tax in cash. You will also owe interest at 18% per annum from the original due date of the relevant GSTR-3B. Claim the ITC only after the cash payment is made. Tools like AI Accountant can flag pending RCMs and compute period-wise interest automatically.

FAQ

What is the difference between a GTA and a regular transporter for GST purposes?

A Goods Transport Agency is any person who provides road transport services and issues a consignment note. A regular transporter who moves goods by road without issuing a consignment note is not a GTA, and their service is exempt from GST. The consignment note is the deciding document: if it exists, you are dealing with a GTA and RCM applies to notified recipients; if it does not, no GST applies on that freight. In practice, configure a document check in AI Accountant to ensure a consignment note exists before RCM is posted.

I received a GTA invoice showing 12% GST. Do I still need to pay RCM?

No. If your GTA has charged 12% GST, they have opted for forward charge by filing Annexure V. The GTA pays the tax, and your RCM liability on those bills is nil. You claim ITC on the 12% charged like any forward charge purchase. Always verify the vendor’s status at the start of the year; AI Accountant can store the Annexure V declaration and lock the tax logic for that vendor.

We mistakenly paid 5% GST on freight that should have been taxed at the goods rate, 18%, as a composite supply. How do we correct this?

The supplier should issue a credit note for the undercharged tax and a revised invoice charging 18% on the full value including freight. The recipient claims ITC on the corrected invoice. If the original invoice is already reported and the statutory time limit for credit notes has not lapsed, correction is still possible. After that window, the supplier may face a demand for the differential tax plus interest. Use AI Accountant to detect mixed-rate lines on the same invoice and prevent such postings.

Does GST apply to freight charges if my company is not registered under GST?

If your company is unregistered, RCM on GTA services generally does not apply to you unless you fall under another notified category such as a factory or a body corporate, or you are a casual taxable person. Unregistered businesses that are not notified recipients pay no GST on GTA services and no self-invoice is required. If you later register, ensure historical treatment is consistent and documented.

What happens if we pay RCM on a GTA bill but the transporter later turns out to not be a GTA, no consignment note?

If the transporter is not a GTA, no RCM liability existed. Tax paid in error under RCM is excess and may be claimed as a refund or adjusted against future liabilities. The ITC availed must be reversed since the original tax was not legally due. Maintain the consignment note trail, or proof of absence, to support your position. Set up a control in AI Accountant to block RCM postings without a consignment note reference.