Modes Of Transportation: What Is The Best Way To Transport Goods?

The GST registration for transportation applies to commodities and people travelling by road, rail, air, or water. It is an evident fact that the transportation industry plays a critical role in any country’s development. Furthermore, it is not incorrect to state that the transportation sector and a nation’s economy are inextricably linked.

The road transport industry was in the spotlight a few years ago because of the new GST, which applies to freight rates, including goods transport agencies, or GTAs. 

In every stage of human civilization, the transportation industries, which do nothing more than carrying people and stuff from one location to another, have been one of the most significant activities of men.

In this blog, we shall disseminate information about the application of GST to the transportation of products and passengers.

Take a look at GTA’s Concept

Any person or business that provides road freight transport and issues assignment notes get referred to as a Goods Transportation Agency or GTA. When reading the GST act, the term GTA does not always relate to an individual or corporation who hires out cars for transportation. 

As a result, businesses or individuals are issuing consignment notes and obtaining certification as a Goods Transportation Agency.

Advantages of transportation

  1. Transport aids in spreading commodities throughout a larger market, resulting in increased demand for the goods.
  2. It contributes to price stabilisation by transferring items from regions where there are enough to places where they are needed.
  3. It aids industries that produce perishable items, including meat, fisheries, and dairy farming.
  4. Transportation helps to lower costs and enhance purchasing power.
  5. Consumers gain from improved modes of transportation in a variety of ways. Consumers benefit from using numerous items (that cannot get manufactured in their area) by transferring them from other locations.
  6. It has also aided the development of cities and urban areas and maintained a connection with faraway regions.
  7. It facilitates labour and capital movement.
  8. It aids in expanding productivity and, as a result, the people’s standard of living.
  9. People from various places can communicate with one another because of transportation. It promotes international cooperation, social connections, and understanding by encouraging the exchange of ideas.
  10. It contributes to a country’s increased wealth and income. It is also a revenue generator for the government. Loan for MSME often covers transportation tax.

GST on transportation goods

GST on goods transportation starts at $0 and increases at a set pace. Transportation of goods outbound by rail, road, air, and inland waterways is subject to the goods and service tax. Exempted items from the goods and services tax on transportation:

  • Transportation of military or defence equipment
  • Milk, legumes, flour, rice, salt, and many grains of food
  • The material gets provided to victims of natural or man-made disasters, accidents, and mishaps, among other things.
  • The paper Registrar registers magazines and books.
  • Agricultural products as well as organic manure
  • If the overall cost of goods transportation is less than Rs 1500

Analysing modes of transportation

When choosing a mode of transportation, you should take the following criteria into account:

Cost

Water transportation is less expensive for transporting big and bulky items over long distances, especially when time is not a factor. In terms of service cost, rail transportation comes in second.

For transporting great products over long distances, it is less expensive than road freight. Air travel is the most costly mode of transportation, and it has a limited capacity. It’s only good for transporting perishable, light, and valuable items. 

Business owners must opt for a loan for MSME to cover such charges.

Travel time

Air travel is the fastest mode of transportation, while ocean travel is the slowest. Over small distances, road transit is more rapid than rail transport. Goods can be directly placed into a wheeled vehicle and delivered to their ultimate destination. Over vast distances, rail transit is faster than vehicle transport.

Flexibility

Road transportation has a significant edge over all other modes of transportation in terms of service flexibility. Road transportation can provide door-to-door service.

You can customise its itineraries and timings to meet individual needs. Different ways of transportation, such as water, rail, and air, are inflexible and unable to provide door-to-door service. Road transport also serves as a supplement to other modes of transportation.

Consistency

Compared to other modes of transportation, rail transit is the most consistent, regular, and consistent. Weather conditions have no bearing on it. Different ways of transportation, such as water, road, and air, are affected by weather conditions and are unreliable.

When compared to sea and air transportation, the impact of weather on-road vehicles is relatively minor. Air travel is the most insecure and unreliable mode of transportation. Weather conditions may cause flight plans to get cancelled.

Safety

The safest mode of transportation is via car. Rail transport also ensures that commodities get transported safely. The most dangerous modes of transportation are water and air travel.

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Which is the best transportation method?

  1. Truck freight or road transportation is well suited for transporting things that are not inexpensive or large and goods you must transport over short distances. It’s also ideal for transporting perishable items, including vegetables, fruits, eggs, and milk.
  2. Rail transit is ideal for transporting large, bulky items across long distances.
  3. Marine transportation is the most acceptable mode of transport for transporting large and bulky low-cost commodities that do not require immediate delivery.
  4. Airfreight is ideal for transporting perishable, valuable, and light high-value items such as gold, jewellery, and other things that require expedited delivery.

One of the most important aspects of business is to transport goods from one place to another. There are various methods to transport goods such as by rail, by road by air, and by sea.

Usually, businesses use air and sea modes of transportation when they transport goods out of the country. Within India, the most common ways are to transport goods by train or by road.

Each of these modes has its advantages and disadvantages. We shall see them in brief when we compare the methods of truck vs train to transport goods.

Advantages when you transport goods by train

There are many advantages when you transport goods by train in India. Let us look at them in brief.

  • Dependable: Rail goods transport is always dependable because it is not very affected by the vagaries of weather such as rain, fog, or snow. The goods are in the custody of the railways and hence, chances of pilferage are also low.

  • Quick: When you compare rail vs road transport in India, you find transporting goods by rail is definitely quicker. Trains move for longer distances at higher speeds. Hence, rail transport is the most favoured method when you have to transport goods to faraway destinations.

  • Organized service: Compared to any other internal transport in India, rail transport is the most organized. They have fixed routes and manageable schedules. The trains usually run on time. Hence, many businesses prefer to transport goods by train in India.

  • Capable of carrying heavy loads: Transporting heavy equipment by train is definitely easier than doing it by road. The railway engines are capable of hauling heavy loads from one part of the country to another. In addition, one can add more coaches to the train in case of heavier demand. Therefore they can carry larger loads.

  • Safe: Safety of the goods is of prime importance. Trains are less prone to suffer from accidents and breakdowns. Hence, you get an element of safety when you transport goods by train.

  • Economical: The overhead expenses in the case of train travel are minimal. This translates into cheaper rates on rail goods transport. Rail transport does not include any labour costs. In fact, these rail freight trains have a couple of drivers and a guard.

Advantages when you transport goods by road:

Let us look at the advantages when you transport goods by road in India.

  • Door-to-door service: This is the biggest advantage when you transport goods by road. Businesses can transport goods from warehouses to warehouses directly when they use road transport

  • Less investment: Individual trucks cost less as compared to investment in railways.

  • Flexibility: Trains run on fixed schedules. Trucks do not. You have the advantage of changing the routes and timings at your convenience.
  • Best for shorter distances: When you transport goods over a shorter distance, it is always better to prefer road transport. Goods reach faster when they travel for shorter distances.

  • Savings in packing goods: You can transport goods with minimum packing when you use road transport. Some goods can be transported without packaging as well. This is not possible in rail goods transport. You can supervise the loading and unloading of goods. Hence, it is easy to ensure the safety of goods like glass and crockery.

  • Feeder to other modes: Road transport can go to every nook and corner of the country. Hence, the trucks can act as feeders to other modes of transport such as rail, air, or sea.

A broad comparison of rail vs road transport in India

There is a monopoly of the Indian Railways when you transport goods by rail. You cannot bargain for better rates. This is not the case when you use the roads for transporting your goods. The heavy competition ensures that you can bargain for better rates.

The delivery and collecting of the goods from the railway yards rest with you. When you use roadways to transport goods, you get door-to-door delivery.

Since trains carry more loads at a time, they are comparatively cheaper as compared to road transport. This benefits the poorer section of society.

The roads have a larger reach when compared to railways. Roads can go deep into the rural as well as inhospitable areas. Trains do not.

When you compare rail freight vs road freight in India, railways had the benefit in the pre-GST regime. They are beneficial in the post GST scenario as well.

This was because there was an abatement of 70% in service tax when you transport goods by train in India. When you transport goods by road, service tax abatement was not available.

Under the GST regime, transporting goods by train attracts GST @ 5%. In addition, an input tax credit is also available. When you transport goods by road, GST is 5% but you do not get the benefit of Input Tax Credit on transportation through Goods Transporting Agencies.

The soon to be launched E-Way Bill also specifies road transport taxes. Transporting goods by rail has environmental benefits because this mode of transport does not cause air pollution. Road transport leaves behind its carbon footprint.

Traffic jams can cause a delay in the delivery of goods by road. While railways also face delays, these delays are resolved in a certain timeframe.

Rail transport is better when you consider the pilferage aspect. The chances of burglary on the roads are always higher. Similarly, roads are more prone to accidents as compared to rail transport.

The insurance aspect – Goods in transit insurance explained

When you transport goods by rail, road, air, or sea, there is always a danger of damage to the goods, theft, and so on. This is why it is imperative to have a ‘goods in transit’ insurance policy in force whenever you transport goods.

There are two types of transit insurance. One is the cargo insurance taken out by the owner of the goods. This protects him from pilferage and damage to the goods while in transit. The transport operator takes out a ‘civil liability insurance policy to protect him when he is called upon to pay for the damage or loss to the goods he is transporting.

GST on transport goods by road

Now that you have learned that there are both advantages and disadvantages of roadways and railways mode of transportation and both are the safest mode of transport in India, you can choose wisely. However, you need to know that GST is levied on the transport of goods in India.

Conclusion:

As you can see, there are several options for transporting your business goods. Your priorities should be the first thing on your mind. Do you need to get your items to their destination quickly? Or are you looking for a way to cut your shipping costs? In either case, you’ll be able to locate a method that suits your demands.

When you compare rail vs road transport in India, statistics point out that road transport is preferable by businesses for obvious reasons. In case the shipment is for longer distances, rail goods transport is always preferred over road transport. Hence, you have healthy competition in the transport sector.

All you have to do is know what you’re looking for in a business loan and contact ZipLoan – a one-stop solution to quickly fulfil MSME loan requirements. 

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Mukul Kashyap: A post-graduate in English Literature, Mukul is passionate about writing on a plethora of topics.
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