GST Brings Big Benefits to Logistics Industry in India
Brijesh Lohia, Managing Director of Global Ocean Group
GST implementation expected to favour organised logistics players going forward with a growth rate of 9-10% on the back of increased thrust from the government
The Goods and Services Tax (GST), which got introduced on Saturday, will be a good turn for the organised logistics players going forward. The logistics industry in India is likely to grow at a rate of 9-10% over the medium-term, supported by underlying structural positives, as per an ICRA note.
“GST will benefit all as it is a win-win situation for businessmen, consumers, State and Centre governments. Logistics costs would come down by at least 20%. The government’s thrust towards building multi-modal transportation infrastructure is also likely to have a significant influence. The implementation of GST will not only have a positive impact on the ease of doing business, it will propel formal job creation in logistics industry in the long run. Logistics is likely to be the main beneficiary of this trend in terms of hiring manpower.”
“Now there will be one tax and hassle-free movement of goods in the country as Inter-state ferrying of goods will steadily become more efficient, which will for sure lead to our logistics cost coming down significantly in the long run. End to end result will reduce the final product cost incurred by customers and will timely meet their service demands. This taxation structure will bring consolidation in the supply chain promising to facilitate seamless and fast transfer of goods across the country thus increasing the working capital availability. The idle time would reduce due to easier clearance procedures, eliminating the loss of transit times. Overall logistics business will increase in the long run,” he further adds.
India is a growing economy and the high cost of logistics, currently at 14% of GDP, was having a negative effect but now this sector is in the positive transformation phase with game-changing trends like implementation of GST, increasing focus by foreign investors across the logistics value chain, growing demand for end-to-end solution providers and emergence of new avenues such as e-commerce, logistics parks, cold chains and new start-ups.
The GST implementation will support organised players as it would have three key implications for the logistic sector:
Consolidation of warehousing network and a shift towards a ‘Hub & Spoke’ model.
Higher degree of Tax Compliance.
Creation of level playing field between Express and Traditional Transport Services providers by virtue of access to input tax credit.