GST and Logistics – Impact and Implementation

The Indian Economy now stands as 6^th Largest Economy in the world with a GDP of $9.45 trillion and an expected growth rate of 7.5%. The economy has also been undergoing tremendous changes and there are many challenges awaiting it.

One of the most important and fastest growing sectors of the economy is Logistics Industry. With the industry contributing to 7 percent of the economy, accounting for almost $130 billion (in 2015) and an expected CAGR of 8.6 percent for 2015-20, the industry has a promising future. One of the major reforms in the economy was the introduction of Goods and Service Tax Act, 2017. Introduction of GST has eliminated various taxes under the indirect regime and it has allowed firms to redesign the supply-chains allowing opportunities to the Logistics Industry to increase it’s reach to further locations not limiting it’s operations to local areas.

So how has GST been a game changer for the logistics industry?

As the new GST regime has been clearly marketed as India’s most significant tax reform, let’s take a look at what are actual changes affecting the logistics industry-

• Ease in movement of goods at interstate locations.
• No need to have warehouses in every state as there are no separate tax regimes for different states, making inventory management easy and superior, also reducing the transit time considerably.
• Introduction of E-Way Bills supported by National Information Centre (NIC) has made documentation streamlined and easy for all transactions.
• As there are no separate state taxes and introduction of technology for almost all processes across the border corruption has been curbed heavily.

So let’s have a detailed look on how the GST has changed the scenario for the logistics industry-

The logistics industry can be categorized broadly in two different parts-

• Transportation through roads
• Transportation through Maritime Shipping (by waterways)

a) GST on transportation charges-

Under the pre GST regime when transport services were rendered by Goods Transport Agent (GTA)* the service tax on such services was to be paid under Reverse Charge Mechanism (RCM) i.e. the tax on said services was to be paid by service receiver, and an abatement of 60/70% was provided depending upon the goods.

Under GST Regime the transporter GTA can charge 5/12% GST based on following conditions-

• If GST is charged @ 5% the no Input Tax Credit shall be available to such GTA and RCM shall apply.
• If GTA charges @ 12% then ITC on such services can be availed and no RCM shall apply.

(As per Notification No. 20/2017- Central tax dated 8^th August, 2017)

Invoicing for GTA

An invoice issued by GTA shall have following details –

1. Name of the consignor and the consignee
2. Registration number of goods carriage in which the goods are transported
3. Details of goods transported
4. Gross weight of the consignment
5. Details of place of origin and destination
6. GSTIN of the person liable for paying tax whether as consigner, consignee or goods transport agency
7. Name, address and GSTIN (if applicable) of the GTA
8. Tax invoice number (it must be generated consecutively and each tax invoice will have a unique number for that financial year)
9. Date of issue
10. Description of service
11. Taxable value of supply
12. Applicable rate of GST (Rates of CGST, SGST, IGST, UTGST and cess clearly mentioned)
13. Amount of tax (With breakup of amounts of CGST, SGST, IGST, UTGST and cess)
14. Whether GST is payable on reverse charge basis
15. Signature of the supplier.

(*As per Notification No. 11/2017-Central Tax (Rate) dated 28^th June, 2017, “goods transport agency” or GTA means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.)

b) GST impact on Maritime Shipping

Prior to introduction of GST in 2017, the maritime shipping industry was levied with Service Tax (ST) under a series of events-

• Primarily the services of ocean freight were included in negative list vide entry no 66D(p)(ii)
• Then they were removed from negative list on 1-06-2016, and later an exemption was granted vide Entry 53 dated 20-06-2012, retrospectively.
• The said Entry 53 was removed vide Notification No.1/2017-ST dated 12-01-2017.
• Notification No.2/2017-ST & 3/2017-ST brought the services under levy of ST on agents in India, foreign liner or streamer liner.
• Vide Notification No. 15/2017-ST & 16/2017-ST both dated 13-04-2017 the liability to pay ST was levied upon the importer under RCM.

Post GST Scenario-

Vide Notification No.2/2018 Central Tax (Rate) w.e.f 25-01-2018 till 30-09-2018 GST on export freight had been exempted from levy of GST. However after the said date GST @ 5% is attracted on every transaction of CIF basis as the freight in these cases is bourne by the exporter.

As far as imports are concerned vide Notification No. 8/2017-Integrated Tax (Rate) dated 28-06-2017 GST @ 5% is levied on RCM basis (to be paid by importer) on supply of services by way of transportation of goods upto custom clearance.

Hence, it can be ascertained that even though the new tax regime has not been concrete in terms of compliance, once a proper process in these regards is set the changes will affect the industry in a positive manner.

-Abhishek Kanani- (Email- akbk2807@gmail.com)