GST Roll-out will Bring Cheers to Logistics Sector

The proposed Goods and Services Tax (GST) Bill, which is again testing waters at the Parliament for a possible sail-through, will come as a bonanza for Indian logistics industry, which, according to Care Ratings, will help the industry trim cost by 20 per cent with CAGR rate remaining at 15-20 per cent till 2020.

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Chennai, Tamil Nadu, July 21, 2016 /India PRwire/ -- The proposed Goods and Services Tax (GST) Bill, which is again testing waters at the Parliament for a possible sail-through, will come as a bonanza for Indian logistics industry, which, according to Care Ratings, will help the industry trim cost by 20 per cent with CAGR rate remaining at 15-20 per cent till 2020.

Though much-delayed, the GST rollout will facilitate uniform taxation structure and cheaper and faster delivery/movement of goods across India, the report noted.

The one-nation-one-tax structure can bring down the tax cost considerably for logistics sector which is primarily classified into transportation, warehousing, freight forwarding and value-added logistics, and truckers can avoid long queues at entry points or checkpoints of inter or intra states and deliver goods early at much lower operational cost.

The logistics cost can go down drastically as operators can restructure and rationalize warehouses and logistical infrastructure. Trucks remain idle for the most part of the day at check posts or entry points due to entry tax, Octroi, local body tax and other such hurdles, which lead to loss of huge man-hour and fuel, the report pointed out.

The levying of GST on goods transportation and availability of full credit on interstate transactions will lower the logistic cost by 1.5-2 percent of sales supported by going down optimization and lower inventory cost.

A World Bank report has recently pointed out that uniform taxation can save corporates up to 40 per cent of their logistic expenses which are mostly incurred at toll plazas and check-posts.

"GST will create a positive environment of uniform taxation system instead of the current cascading taxes faced by traders through Central and State Tax Policies. The central GST, which is proposed for inter-state movements of goods, will reduce enormous paper works and complexities faced by finance people. They now have to only follow one policy with astute transparency. For those moving cargo within the state, will have to comply only with the state laws as far as taxation is concerned. This will reduce the tax for traders who may pass on the benefit to the end customers," opines Bhaskar Venkatraman, the Founder and Director of JusTransact.com, the e-commerce wing of Millennium India, which caters POS technology products to logistics and other industries.

The transportation aids more than 60 per cent growth of logistics sector followed by warehousing, which meets agricultural and industrial storage at 25 per cent, while packaging and other related businesses contribute the rest, he says.

Currently, India follows double taxation policy - central and state taxes, creating the complex web of taxes on goods and services with each state imposing taxes at various rates on goods that cross its borders, leading to multiple taxations and complex calculation processes.

At present, the taxation rate goes up at 26.5% (Central VAT (Cenvat) of 14 per cent and State VAT of 12.5 per cent) apart from 2 percent state-level corporate tax for moving interstate goods.

The proposed GST model, which includes both central GST and state GST, proposes to convert around 29 Central and State taxes and tariffs into a single tax at the point of sale (POS). According to the draft proposal, GST is expected to bring down the combined Centre and State rates to 18-21 percent from the current 26.5 percent.

GST will also eliminate the current practice followed by companies to manage multiple warehouses in different states due to the existing interstate taxation policy. Companies are forced to maintain warehouses in each state and on an average each company maintains 20-30 warehouses in addition to having 20-30 carry & forwarding agents in each state making the supply chain longer, complicated and inefficient.


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