GST Council Proposes 5% GST on E-Commerce Delivery Services

The Goods and Services Tax (GST) Council has proposed a uniform 5% GST levy on certain delivery services connected with e-commerce transactions, with no input tax credit (ITC). The proposal is aimed at bringing greater clarity to the tax treatment of deliveries made through electronic commerce operators (ECOs), particularly as India’s e-commerce and quick-commerce sectors continue to expand.

The proposal covers delivery services supplied through e-commerce platforms and would apply irrespective of the mode of transport used to deliver the goods. The move could change the tax treatment of a segment of India’s rapidly growing logistics ecosystem, which includes individual delivery partners, goods transport agencies and other logistics providers. Moneycontrol reported that the Council’s October 8 discussions seek to bring such services under a 5% GST framework without ITC.

What Is the Proposed 5% GST Rule?

Under the proposal, delivery services supplied through an electronic commerce operator would attract GST at 5%, with no input tax credit.

The measure is particularly relevant to delivery partners operating through e-commerce platforms who are below the normal GST registration threshold.

The Council is seeking to bring greater uniformity to the tax treatment of these services rather than allowing different tax outcomes depending on the contractual structure or transport method used.

Proposed GST treatment

Particular	Proposed treatment
GST rate	5%
Input tax credit	Not available
Sector	E-commerce delivery
Platform	Electronic commerce operators
Transport modes	All modes, subject to applicable provisions
Key objective	Uniformity and clarity in taxation

The final legal wording and implementation conditions will determine exactly which delivery transactions fall within the new framework.

Why E-Commerce Deliveries Are Being Targeted

India’s online retail market has expanded rapidly, creating a huge delivery ecosystem.

Traditional e-commerce companies, grocery platforms and quick-commerce businesses increasingly depend on large networks of delivery partners to move goods from warehouses, dark stores and sellers to customers.

The tax treatment of these services has not always been straightforward.

Individual delivery partners may operate below the GST registration threshold, while platforms can have different contractual arrangements with logistics companies and delivery providers.

The proposed 5% rate is intended to create a more consistent framework.

Government sources cited by Moneycontrol said deliveries of e-commerce goods through different transport channels would attract 5% GST under the proposed approach.

No Input Tax Credit Under the Proposal

One of the most important features of the proposed regime is the absence of input tax credit.

Under GST, ITC allows an eligible business to offset GST paid on inputs and services against GST collected on its outward supplies.

A 5% rate without ITC therefore works differently from an 18% rate with full credit.

For delivery businesses, expenses such as vehicles, maintenance, technology services, leased facilities and other business inputs can carry GST. If the delivery service is taxed at 5% without ITC, those input taxes would generally become a cost rather than being fully offset.

The lower headline rate therefore needs to be considered alongside the loss of credit.

Delivery by All Modes Could Be Covered

The proposal is significant because it seeks to remove distinctions based on how an e-commerce order is physically transported.

Deliveries can involve motorcycles, three-wheelers, vans, trucks and other forms of transport.

Moneycontrol reported that government sources clarified that e-commerce goods delivered through all modes of transport would attract the proposed 5% GST.

This could reduce uncertainty for platforms and logistics companies that use multiple transportation models within the same supply chain.

For example, a package could move from a fulfilment centre to a local hub through a larger vehicle and then be delivered to the customer by an individual rider.

A uniform tax framework could make the treatment of the delivery component easier to determine.

Goods Transport Agency Exemption May Change

The proposal also seeks to remove an existing GST exemption for transportation of goods to unregistered persons by goods transport agencies (GTAs) where the goods have been supplied or ordered through an e-commerce operator.

This is significant because many e-commerce customers are individual consumers who are not registered under GST.

The proposed change would bring the delivery of such goods into the 5% GST framework.

It would also reduce differences between deliveries handled by individual platform-linked riders and those undertaken through formal goods transport agencies.

Impact on E-Commerce Companies

The proposed tax change could affect the cost structure of online retailers and e-commerce platforms.

Companies such as online marketplaces, grocery platforms and quick-commerce businesses typically operate complex delivery networks involving both employees and independent partners.

A 5% GST charge could increase the tax component associated with delivery services in transactions where the service was previously outside the effective GST net or subject to a different treatment.

However, the final economic impact will depend on how platforms account for the tax and whether the additional cost is absorbed by the platform, passed on to sellers or reflected in delivery charges.

For highly competitive quick-commerce businesses, even relatively small changes in per-order costs can become significant when multiplied across millions of deliveries.

Quick Commerce Could Be Closely Affected

The proposed change is particularly relevant to quick commerce.

Platforms offering deliveries within minutes rely heavily on dense networks of delivery partners. Their business models involve frequent movement of relatively small orders over short distances.

A uniform 5% GST regime could simplify the tax treatment of those deliveries.

At the same time, the lack of ITC means companies will need to examine the tax cost associated with their broader logistics operations.

Quick-commerce companies operate dark stores, warehouses, technology systems and transportation networks, creating multiple categories of expenditure.

The final rules will determine how the proposed tax applies to each component.

Delivery Partners and GST Registration

The Council’s decision also addresses the position of smaller delivery partners.

Under the GST framework, businesses below the applicable turnover threshold generally do not need to register for GST, subject to the law and specific circumstances.

Moneycontrol reported that the Council approved a 5% GST rate for delivery services provided by unregistered delivery partners through e-commerce platforms.

This is intended to resolve uncertainty around whether such services should be taxed when the individual service provider is not independently registered.

The electronic commerce operator mechanism allows GST obligations to be placed on the platform for specified services rather than requiring every individual provider to independently collect and remit GST.

Different From Passenger Transport Rules

The delivery proposal should be distinguished from the separate GST discussions concerning passenger transportation and vehicle rentals.

The GST Council has also considered changes to the taxation and ITC treatment of passenger vehicles, but the motor-vehicle ITC proposal was deferred for further consideration.

The delivery proposal instead focuses on services associated with the transportation of goods ordered or supplied through e-commerce platforms.

This distinction matters because the two proposals affect different parts of the mobility and logistics ecosystem.

Tax Depends on the Service, Not Just the Contract

A broader theme emerging from the GST Council’s latest reforms is an attempt to make taxation depend more directly on the service actually supplied.

The Council has discussed standardising taxation across different e-commerce business models so that the tax treatment is determined by the underlying service rather than solely by the contractual structure used by a platform.

This approach could reduce disputes where two businesses provide essentially similar services but use different contractual arrangements.

For e-commerce platforms, it could also make tax compliance more predictable.

Why the Change Matters for Logistics

India’s logistics industry is becoming increasingly integrated with digital commerce.

E-commerce platforms are no longer simply connecting buyers and sellers. They increasingly manage warehousing, inventory, fulfilment, transportation and last-mile delivery.

This has blurred the boundaries between online retail and logistics.

A clearer GST framework could help businesses determine where tax obligations arise across this supply chain.

It could also reduce disputes between platforms, delivery partners and tax authorities over the appropriate treatment of different transactions.

Potential Impact on Consumers

The direct impact on consumers will depend on how businesses absorb the proposed tax.

If platforms absorb the additional cost, consumers may see little immediate change in delivery charges.

If the cost is passed through, however, delivery fees or product prices could increase for some transactions.

The impact could be particularly relevant in quick commerce, where low delivery charges and high order frequency are important parts of the business model.

Companies may also attempt to offset the impact through changes to delivery fees, minimum order values or promotional offers.

GST Reforms Shift Toward Process Changes

The delivery proposal is part of a wider set of GST reforms being considered or approved by the Council.

The October 8 meeting focused heavily on simplifying registration, accelerating refunds, reducing low-value disputes and changing enforcement procedures rather than undertaking another broad GST rate restructuring.

The Council has also approved a ₹10,000 threshold for GST show-cause notices and changes to GST enforcement, while the prosecution threshold has been raised from ₹1 crore to ₹5 crore.

These measures indicate that the current phase of GST reform is focused heavily on administration and compliance.

Implementation Will Be Important

The exact impact of the delivery proposal will depend on the final notifications, rules and effective date.

The government has said that the broader GST process reforms approved at the October 8 meeting will take effect from April 1, 2027.

Businesses will therefore need to monitor the detailed legal provisions before making changes to their accounting systems or pricing structures.

The treatment of individual delivery partners, GTAs, platform operators and other logistics providers will be particularly important.

The Bigger Picture

The proposed 5% GST regime represents an attempt to bring greater consistency to a delivery ecosystem that has expanded rapidly alongside India’s e-commerce and quick-commerce industries. By applying the proposed levy across different delivery channels, the government is seeking to reduce differences arising from the way logistics services are structured.

The absence of ITC, however, means the headline 5% rate does not tell the entire story. Businesses will need to calculate the total tax cost after accounting for GST paid on their own inputs. The eventual impact could therefore differ substantially between asset-light delivery platforms, logistics companies and businesses operating large physical fleets.

The proposal also fits into the broader GST Council effort to resolve ambiguities that have emerged as digital business models have evolved. As e-commerce platforms increasingly combine retail, warehousing and logistics, clearer rules could become increasingly important for both taxpayers and the government.

Looking Ahead

The next step will be the detailed implementation framework explaining how the 5% GST rate will apply to different types of e-commerce delivery services and who will be responsible for paying the tax. Businesses will also need clarity on the treatment of existing contracts, delivery charges and services supplied through different logistics partners.

For India’s e-commerce sector, the change could create a more standardised tax environment, but it may also alter delivery economics. Platforms will have to decide how much of any additional tax cost to absorb and how much to pass through the supply chain, making the final rules important for both logistics companies and online consumers.