The Indian Economy now stands as 6th 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-
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-
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-
Invoicing for GTA
An invoice issued by GTA shall have following details –
(*As per Notification No. 11/2017-Central Tax (Rate) dated 28th 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-
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- [email protected])