• India’s GST 2.0 reform transforms the logistics landscape, simplifying tax structures and cutting costs on core infrastructure to strengthen supply chain efficiency and global competitiveness.
• Air cargo emerges as a key beneficiary, with lower taxation expected to boost capacity, reduce freight rates, and accelerate investment in airport and warehousing infrastructure.
• Aligned with GatiShakti and global trade shifts, GST 2.0 enhances India’s role as a logistics and manufacturing hub—fuelled by digitalisation, SME integration, and expanding cross-border e-commerce.

India’s newly unveiled Goods and Services Tax (GST) 2.0 reforms have introduced one of the country’s most significant fiscal shifts in nearly a decade, with wide-reaching implications for air cargo, global supply chains, and trade policy. Presented against a backdrop of intensifying tariff disputes with the United States, renewed BRICS initiatives, and evolving trade alignments under the Shanghai Cooperation Organisation (SCO), the reform signals India’s intent to strengthen its position as a central node in global logistics.

The GST overhaul focuses on simplifying rate structures and reducing taxation on core logistics and infrastructure inputs—including trucks, tyres, cement, and steel—components that underpin the cost of freight and cargo-handling infrastructure. The move is designed to improve supply chain efficiency and competitiveness in a market where logistics costs are estimated at 13–14 percent of GDP, compared with 8–9 percent in advanced economies such as Singapore and Germany. 

“By rationalising taxes on core infrastructure and logistics components, GST 2.0 will accelerate domestic consumption and stimulate trade volumes,” said Rizwan Soomar, CEO & Managing Director, Middle East, North Africa & India Subcontinent, DP World.

“This transformative move strengthens India’s supply chain backbone and reinforces confidence in India’s growth story. DP World, with its integrated ports, terminals, rail connectivity, and digital platforms, is uniquely positioned to support this momentum.”

Strategic beneficiary

Air cargo is poised to be one of the biggest winners of GST 2.0. India’s international air cargo volumes grew 8.6 percent year-on-year in H1 2025, driven by pharmaceuticals, automotive components, and cross-border e-commerce. Rationalised tax rates on logistics infrastructure and transport assets could enable faster capacity expansion at airports and reduce freight rates by three to five percent over the next two years.

Cargo terminals at metro airports—Delhi, Mumbai, Bengaluru, and Hyderabad—are already under pressure from surging e-commerce and perishables trade. Lower GST rates on construction materials and specialised cargo-handling equipment may accelerate investment in warehousing and temperature-controlled facilities, helping India meet growing demand for high-value, time-sensitive shipments.

The reforms align with the PM GatiShakti National Master Plan, a multi-trillion-rupee initiative to develop integrated multimodal freight corridors. By reducing bottlenecks in first- and last-mile connectivity through lower taxation on road assets, GST 2.0 could create an ecosystem where air cargo integrates more effectively with road, rail, and coastal shipping networks.

Navigating global tensions

India’s tax overhaul coincides with heightened trade tensions and shifting global supply chains. The United States’ decision to escalate tariffs on key imports, including automotive parts and electronics, has complicated export strategies for Indian manufacturers. Meanwhile, BRICS nations are expanding trade settlements in local currencies to reduce reliance on the US dollar, and the SCO Summit in China has highlighted renewed focus on Eurasian logistics corridors.

For India, GST 2.0 serves as a domestic policy lever to counter these external disruptions. By reducing costs and simplifying compliance, the reforms aim to position India as a competitive alternative manufacturing and logistics hub. A senior trade advisor at the Ministry of Commerce stated that “efficient taxation has become a trade negotiation tool; it directly impacts how foreign investors and shippers assess the ease of routing through India.”

Unlocking potential

The tax reform also dovetails with the UK-India Free Trade Agreement (FTA), expected to boost bilateral trade by £25.5 billion annually by 2040 (UK Department for Business and Trade). Lower freight costs, simplified tax credits, and harmonised digital compliance measures could help Indian exporters capitalise on tariff-free market access in sectors like pharmaceuticals, textiles, and engineering goods.

This has direct implications for the air cargo industry. Dedicated freighter routes between India and the UK are likely to increase, particularly for temperature-sensitive goods. Logistics providers are already exploring pharma corridors between Mumbai, Hyderabad, and London Heathrow, with digitalised customs processes and real-time visibility platforms ensuring regulatory compliance.

Digitalisation and SME integration

GST 2.0 also prioritises digital compliance, which will benefit small and medium exporters and air express operators. The introduction of automated returns, simplified credit flows, and e-invoicing is expected to reduce administrative costs for high-volume, low-margin sectors like cross-border e-commerce.

This digital integration is crucial for air cargo’s future growth. Cross-border e-commerce shipments from India are forecast to reach USD 200 billion by 2030 (NASSCOM), with express integrators and freighter operators poised to capture a larger share of this trade. Streamlined tax processes will enable SMEs to access international markets more easily, enhancing cargo throughput at secondary airports such as Jaipur, Nagpur, and Visakhapatnam.