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.

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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

 

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One response to “GST – Impact on Logistics  ”

  1. R S Iyer says:

    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

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