Impact of GST on Logistics Industry


GST (Goods and Services Tax) has been implemented from 01 July 2017 and since then businesses across the country have started to notice its impact. All the taxes such as VAT, service tax, excise duty, Octroi, etc. are incorporated in GST and its impact too is extensive and is expected to be the same in the near future. GST impact on the logistics companies in Delhi and other cities across the country is quite significant because it is aimed to minimize the overall cost and enhance the systematic flow of logistics services.

All the industries in India have witnessed tremendous growth after GST implementation. Logistics and supply chain industry is also one of them. It has brought some key changes in the way these sectors operate, as well as their accounting and bookkeeping activities. According to JLL research, it is predicted that by 2020, the Indian sector will surpass $200 billion.

GST is the major tax transformation and it is implemented to streamline the structure of indirect tax collection. Logistics and supply chain management is also vital parts to be considered under GST head because it is involved in the smooth transportation of goods and services.

The logistics industry comprises of the road transport segment (unorganized and small businesses, trucking agencies or logistics companies in Chennai and other fleets), the warehousing and storage management and the third-party logistics.

Due to the complexity of networks, inadequate infrastructure, growing operational costs across supply chains, and the imposing of entry fee in different states, the operational efficiency of this industry had been dropping. Moreover, multiple business taxes were making logistics management a complex and costly process.

The compatibility of infrastructure, technology and various services play key role in the logistics industry to support the timely and safe delivery of goods to the consumer through a tangible supply chain. GST is introduced with the key goal to improve the Indian economy by reducing corruption. This shows that GST is a key player in the logistics industry.

How GST is filling the Gap?

The GST implementation is greatly helping logistics companies in Delhi and even whole logistics sector but it has many loopholes too. It is also true that this shift from the traditional approach in India’s taxation policy has assuredly some undeniable profits to generate. See below listing to know how the GST impact various areas of the logistics industry-

Easy and quick clearance process!

With the implementation of GST, the time-consuming clearance process and complicated paperwork are simplified at different inter-state points. This automatic structure has reduced the travel time and logistics cost by 30-40%, according to the World Bank Report. The improved speed and reduction of expenses on goods transport have developed a great boost in the GDP of nearly 100-200 bps and also created numerous commercial opportunities.

Logistics companies in Delhi have observed that after the implementation GST, many check posts at more than 20 state borders have already been shut. This ultimately helps trucks to cover more distance. Additionally, before crossing the borders, the e-way bill is forcibly making online registration of goods whose value is more than Rs. 50,000. This clearly reflects that the GST implementation has decreased infrastructure, operational cost, and time issues from the transport way.

A single tax rate under GST!

A single tax rate under GST rule will help the truck booking and logistics companies to avoid the exercise of storing the goods in a warehouse in different states to stick with the distinct tax code of each state. With such rule, now the top consumer agencies can develop a large warehouse at important locations in India and arrange other logistic companies to maintain delivery and supply chains of the goods.

Forward Integration can be helpful!

Eliminating the entry tax and making easy tax amenability system have increased the transit time in the interstate transport of goods by 5-7 hours. As the transport companies are gaining the benefits after GST rollout, it will enable them to deliver services at a lower price. As a result, companies will outsource their logistic operations to a third party as well as fourth party logistics companies in Mumbai. Furthermore, it will create a forward integration and organized mechanism of the logistics sector.

Reducing corruption in logistic processes!

Since GST eliminates the side-lines of the parallel economy, it apparently removes the domination of local booking agents and cross-border corruption by allowing the broader scope for impartial transportation which is equally helpful for businesses, consumers and states.

For interstate shipping firms, manufacturers and distributors, the implementation of a uniform tax rule has put a full stop in time-taking documentation and guaranteed smooth transportation of goods. Trucks in India can now cover around 400-450 Kilometres a day due to the eliminations of many interstate checkpoints. The increase in daily distance covered, drop in maintenance costs, and enhancement in transportation efficiency holds great significance in the logistics sector.

The GST rollout has also given rise to employment opportunities within logistics and supply chain agencies. Data revealed that the demand for skilled professionals in these industries has increased by 35% since the introduction of GST. Many companies have hired skilled courier services workers, data analysts, and even freelancers who work as intermediaries amid these companies and their industrial partners.

The adoption of the hub-and-spoke logistics structure would improve the role of reputable third-party logistics companies, at the same time reducing the dependency on smaller transportation agencies that flourish on last-mile deliveries.

What TruckGuru feels about the GST implementation?

TruckGuru, one of the top logistics companies in Delhi believes that the implementation of the GST (Goods and Services Tax) ushered in much-needed transformations in India’s unorganized logistics and transport sector and helped to boost the movement of trucks.

They have realized that GST rollout has resulted in at least a 20% decrease in turnaround time of trucks after the removal of border check posts. Apart from this, the implementation of the e-way bill on shipments of Rs 50,000 and more has gradually saved them from superfluous checking by state government raid authorities.

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