The proposed ‪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 percent with CAGR rate remaining at 15-20 per cent till 2020.

1. 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.
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 check-points 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 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 per cent of sales supported by go 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 for 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 ecommerce wing of Millennium India, which caters POS technology products to logistics and
other industries.

2. 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 contributes the rest, he says.
Currently India follows double taxation policy – central and state taxes, creating 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 taxation 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 per cent state-level corporate tax for moving inter-state 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
per cent from the current 26.5 per cent.
GST will also eliminate the current practice followed by companies to manage multiple
warehouses at 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 have 20-30 carry & forwarding agents in each state making the supply chain longer,
complicated and inefficient.