GST for Logistics Sector

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GST: Way forward for logistics

Logistics is the sector which is believed to benefit the most from the implementation of GST. 20% of the logistics cost is to fall, says (road transport and shipping minister) Nitin Gadkari (The Economic Times).

The new tax regime turns to be in favor of the transport and logistics sector to the hilt. Earlier, Trucks were delayed on an average of 5 to 7 hours at interstate checkpoints. The average speed of freight transportation was 20-25 km per hour which has been increased to 40 km per hour because of removal of interstate check posts. Trucks that were earlier doing 200 km a day would do 400 km now. Different states collected tax on fright at different rates for the goods coming across their state, which resulted in the collection of same tax multiple times and delays at interstate checkpoints where state authorities review, examine and apply the relevant taxes and other levies. After implementation of GST, the border check posts have been removed and electronic waybills are awaited, which will make truck movement easier.

Supplying goods directly to dealers attracted state VAT whereas transfer from the warehouse is treated as a stock transfer and no sate VAT was paid. To avoid state value-added tax (VAT), hubs were built in various states by the taxpayers. Which resulted in complications and a lack of clarity for businesses, leading to allegations of tax evasion. After GST implementation, the commutation for trucks became easier and stock transfers are not spared, Under GST “supply” includes the supply of goods from one taxable person to another taxable or non-taxable person during furtherance of business with or without consideration. So, it is now suggested to redesign supply chains and centralized hub operations to take advantage of scale economies. where the goods can be stored in a centralized hub and can be later transported to different states which would help to reduce the cost of logistics and provide clarity in business.

The high cost of logistics was affecting approximately 14% of GDP negatively. GST will help in more efficient cross-state transportation, reduce paperwork for road transporters, and most importantly it will bring down logistics costs. GST will raise tax collections for the Centre and states put an end to inspector raj. The scope of the parallel economy turned smaller than earlier resulting a decrement in the generation of black money.  GST is a win-win situation for businessmen, consumers, state governments and the Centre.


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