Press Release: 06 October 2016
Goods and Service Tax (GST) is a step forward in having a uniform tax system in the country. It will help large body of traders and replace various different taxes that Centre and State governments charge separately.
In Indian context, GST bill came-up as a big-bang reform. It is a good time for players from different industries to restructure their ideas and increase profitability. This is also a good time for e-commerce players as they will be able to service many more locations across the country. The transition time, paper work all these time taking procedures will now reduce, which eventually benefit logistics players. These cost savings will also benefit the consumers.
The GST will eliminate double taxation and enable a shared national market, which leads to improved collections. Usually, various services including logistics are involved in getting the material or product to its final customers. Service tax is paid on the cost of such services. However with GST, cost of any services, including logistics, will be considered a value addition, and the manufacturer will get tax credit for the tax paid.
At present, most of the companies operate with several warehouse strategies, having different warehouses in different states, to avoid interstate taxes. Companies like North Eastern Carrying Corporation, Coastal Roadways, TAAL Enterprises, Chartered Logistics and Allcargo Logistics have surged by 17.74 per cent, 17.74 per cent, 16.70 per cent, 16.67 per cent and 10.51 per cent from July 18 to August 2. The benchmark gained 0.85 per cent during the same period. With GST in place, India will become a common market without any difference between interstate or intrastate sales. Now, the focus would shift from saving tax by having smaller warehouses, to improve the overall efficiency.
Recently, World Bank has released Logistics Performance Index (LPI) where India has jumped 19 positions. The country now stands at the 35th rank among 160 countries, up from the 54th position in 2014. GST will bring various changes in transportation as well which include number of days, carrying cost and octroi duty. With a single rate being applied to all goods and services there will be a significant redistribution of taxes across all categories resulting in reduction in taxes on manufactured goods and hence impacting the pricing of the product. Through GST, cost of any services, including logistics, will be considered values add, and the manufacturer will get tax credit for the service tax paid.