India’s greatest tax reform — replacing an array of provincial duties with a nationwide goods and services tax — is transforming the logistics industry in a country where moving stuff around is notoriously difficult to do. Articles discusses Impact of GST on Logistic Sector in India-
| Pre GST India | Post GST India | |
|
Idling of Trucks |
A typical truck spent 20% of its run time at interstate check posts. On an average, a truck in India runs an annual distance of 60,000 km as against 200,000 km in the West |
Significant reduction in travel time on the same Route.
Interstate check posts removed, travel time of long-haul trucks, other cargo vehicles cut by at least one-fifth. |
|
Tax compliance |
Complex tax structure and paper work forced the transport industry to spend 50-60% of resources on tax compliance and deposit of interstate sales tax |
Monitoring, collection of sales tax at interstate barriers obviated.
A single GST means increased uptime for trucks, better turnaround and optimized warehousing structure |
|
Tax maze |
Centre and state statutory tax rate for most goods worked out to be 26.5% | A shared national market & Tax Rate of most of the goods are in the range of 18%. |
|
Cost burden |
India was burdened with heavy logistics costs.
About 14% of the total value of goods as against 6-8% in other major countries. |
Logistics cost down to 10-12% of total value of goods |
|
Checkposts |
Check posts were operated by CTO, RTO and other departments to verify the documents related to consignment, vehicles and drivers.
Stoppages at these check-posts have been one of the key reasons behind the inefficiency of Indian logistics sector. |
VAT forms no longer needed.
However, the State of Karnataka & Gujarat has continued the requirement to fill modified forms. All States have removed their Checkposts. Elimination of OCTROI collection has led to decongestion of cities. |
|
Truck movement |
Trucks covering 225 km a day. |
Trucks covering 300-325 km a day.
E.g. Trucks save 8 hours on Chennai-Delhi run. A truck from Chennai to Jamshedpur carrying tyres made by Apollo Tyres reached in three and a half days as state border barriers began to be dismantled after the implementation of the GST. The proposed E-way bill that will ease the movement of freight further. |
|
Godowns |
Companies were forced to put up and maintain warehouses in every state due to different taxation slabs. | GST does away with the need to have a separate Warehouse for every state. This means a leaner and smarter logistics chain. This will also encourage more FDI in warehousing. |
|
Import & Export cost |
In a direct cost comparison with China, India’s average cost to export or import one container is around 72% higher in higher transit time. |
GST will boost demand for high tonnage trucks and lead to overall reduction in transportation costs |
Source: Ministry of Road Transport & Highways & Ministry of Finance, GOI
The Author is a budding Tax Law Professional and may be reached @ shreetaxchambers@bsnl.in
Author Bio
What is the treatment and tax aspect where a company buys a freight rate from a shipowner in singapore
then sells the rate & collects the freight on behalf of the Russian Importer.
GST rates & T treatment in books – pls throw some lght