Logistic players are keeping an eye on the roll out of GST (Goods and Services Tax) this year.The supervisory reforms proposed in the GST presents a golden prospect to revisit, rationalize and re-engineer logistics networks in India.
If GST is implemented by fiscal 2016 -2017, interstate sales transaction will become tax neutral and the entire country will come under one single market without any state borders.
With GST, there will be efficient cross—state transportation and rationalization of paper work for road transporters. This will reduce logistics costs as taxation will be done at a national level and not by each state.
In a joyful mood, Ramkrishnan Kumaran, CIO, Flyjac Logistics said, “with GST the tax regime will become simple and indirect taxes will get abolished."
Moreover, the implementation of GST is expected to unleash numerous opportunities for companies in the logistics sector. The ambitious goods and services tax would add 2 percent to the logistics growth in our country.
Many players want the government to take a cohesive approach because the Indian economy is striving for improvements in the supply chain and logistics sector. At present, a complicated tax regime with poor infrastructure has resulted in exorbitant logistics costs in India. It is now 14 per cent of the total value of goods as compared to seven to eight per cent in developed countries.
It is expected that GST will result in consolidation of warehousing coupled with facilitating seamless inter-state flow of goods. This will dismantle various check posts and thus bring down logistics costs.
In an interview to The Hindu Business Line, Managing Director of DHL Supply Chain Vikas Anand, said, “In the post GST scenario, location of the warehouse would be more driven by the market forces of demand and supply. In the coming years the smaller warehouses of 15,000 to 20,000 sq ft would be merged and larger ones of over 2 lakh sq feet would be set up.”
Interestingly, the larger warehouses can benefit from technological sophistication by installing state of the art planning and warehousing systems which are not practical in smaller and dispersed warehouses.
Good news for the CIOs as the IT costs of installing ERPs in small warehouses can be saved.
The ambitious goods and services tax would add 2 percent to the logistics growth in our country.
Highlighting the benefits of GST, Shreesh Patwardhan, CIO and VP IT, Dynamics Logistics ,said that, with GST there won’t be any restriction in interstate transfers. Big players can optimize and consolidate storage locations.
Stressing on the benefits of GST for the logistics industry, Abbas Khan, Head- IT, Triparth Logistics, said, “The transportation time gets faster and the turnover time to deliver goods to the customers also becomes fast.”
Saunak Ghoshal, Partner - Technology Consulting, PwC India, is of the opinion: “With GST, companies will gain 4-8 percent on taxation depending on the number of states they are operating in and make 5 percent margin.”
The Govt policy of improving upon the quality of e-governance should address the above requirement which will add great value to the efficiency of logistics in the country.
At the same time, GST, is one of the most vital reforms, since the economic liberalization in 1991, as it can strengthen the global competitiveness of Indian logistic providers.
The government’s pledge to pass the GST bill is a much needed step to improve supply chain efficiencies and reduce losses.
Let’s hope, the GST will be introduced at some point of time in 2016.