The Impact of GST on the Logistics Sector

Logistics plays an important role in the success of business. Companies that provide services and goods rely on logistics services for the timely delivery of their products to the buyer and the end-user. The advent of much awaited GST bill promises to bring growth for the business sector.

Business owners are now looking at a simplifying taxation process that is less time-consuming and promotes better business transactions. Another tangible benefit the GST offers to the corporate India is likely to come from reasonable logistics costs that are reduced by a considerable margin.

Bigger warehouses and end market have driven logistics planning is likely to result in meaningful cost savings over time. On account of entry taxes and heavy paperwork at state check posts, there is an additional 5-7 hour added to the transit time for inter-state transport of goods. Abolishment of entry tax and easier tax compliance procedures is likely to result in easier movement of products and the goods at the nationwide level.” – Indian Express.

The transportation market in the country that is currently dominated by numerous unorganized transport service providers will witness the introduction and the emergence of an organized service provider as multiple taxes will no longer be added costs for businesses.

The Logistics service providers looking at business expansion and reliability as an essential part of their brand value would also invest in adopting dependable and sophisticated technologies and time to time training of manpower in order to increase efficiency. Decrease in price of domestic goods wills encourages an improved product quality and an increase in the competitiveness of the Indian finished products, goods, and services. The same applies to the international market.

People working in logistics industry encourage GST implementation in the system that will make the taxation an easy process. In addition, when a common tax is paid for the transportation of goods applied for multiple states it helps in saving time for paying duties and taxes to the different states and the government authorities.

The logistics and transportation business owners follow different unethical practices in order to evade tax will also deteriorate once the GST gets rolled out. The focus of the business organizations would be concentrated on efficiency rather than tax savings. The uniform tax regime will play a very important role to the next level of growth, enabling the country to realize its potential as a global trading hub. Progress in the overall logistics sector from the perspective of trade would revolve around determining the success of ‘Make in India’ campaign launched by the Government of India.

The positive effect of GST will be faster transportation time and lower turnover time to deliver goods to the customers. A study revealed that GST will have a double positive impact on transport since the logistics cost will come down and efficiency will increase both within India and exports. Certain taxes in the rail transportation department also will either be minimized or will get evaded, resulting in the reduction of load on the road transpositions. Although GST brings a sense of relief for the logistics industry, but keeping it outside the umbrella of GST, makes it a disadvantage. In the defense of the logistics industry, an example of the energy industry is a right fit.

Petroleum products are one of the essential parts of the industry, it would be a welcome move if petroleum was to be ‘non-exempt’ right from the start. This would enable various logistics businesses to avail the credit of the petroleum products used in the course of facilitating and giving the logistics services to the economy. Logistic costs are expected to be decreased by 1.5% – 2.00% of sales. Because of optimization of warehouses, it leads to the lower inventory costs.

This system is set up across the country in different states avoiding paying 2% corporate sales tax. Also, the system is designed to phase out of inter-state sales tax. There is immense scope for optimization of costs. Thus, we see how the advantages of GST outweigh the disadvantages.

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