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Impact of GST on Logistics Industry - IndiaNotes.com
Impact of GST on Logistics Industry
Guest Author | Published: 20 Jun, 2017  | Source : IndiaNotes.com

Long recognized as the backbone of the global economy in the manufacturing and trading industries, logistics plays a crucial role for many developing countries. For example, India has witnessed a significant growth in consumption that has led to an extremely high demand for a wide range of consumer products. Statistics from 4 years ago indicate that the logistics industry was worth an estimated $130 billion (USD).


From these statistics, we can easily deduce that logistics is one of the primary drivers of economic growth and has become a catalyst for increased manufacturing in India. We can also assume that a well-organized logistics industry will play a key role in promoting the Indian Government’s “Make in India” initiative. In the simplest of words, logistics is the transporting of consumer goods from their origination point to the consumer.


A Word about Indian Logistics Companies


During the past decade or so, Indian logistics companies have evolved being sole-party providers to 2nd party and integrated 4th party providers.


These companies are capable of providing total logistics service packages including:

  • logistics optimization
  • management consulting
  • pool distribution
  • transportation
  • warehousing


Furthermore, they are able to compliment these services with advanced, innovative supply chain facilities. When you have well-organized logistics working in conjunction with different supply chains, it ensures that you’ll be delivering the right amount of items for the right price at the right time to the right group of consumers. Conversely, if logistics are not managed properly, it negatively impacts the consumer and the supplier.


The GST (Goods and Services Tax)


The Indian Government is making significant progress in creating and maintaining a favorable business climate. One initiative that the government has proposed is the Goods and Services Tax or GST as it is more commonly referred to. GST latest news reports indicate that this will create a single, unified tax system out of India’s current multi-level system. In turn, this will free the country from all the bureaucratic “red tape” and improve the way in which business is conducted.


According to the latest commentaries regarding GST news, these tax system changes would help to reduce:

  • enhance decision-making within the supply chain
  • result in warehouse consolidations
  • transportation cycle deadlines and timeframes


In terms of growth and improved service levels, it would enable the logistics industry to achieve its goals and reach its potential.


The Impact on Warehousing


In order to avoid a CST (Central Sales Tax) levy as well as State Entry Taxes, the key players in India’s logistics industry develop and maintain multiple warehouse locations. Most of these facilities are plagued with inefficiencies in their operation due to their inability to operate at full capacity. However, GST latest news sources indicate that most of these challenges will be dramatically reduced or eliminated altogether if the new tax system is implemented. As a result, India will become a unified market where the interstate movement of goods will be levy-free.


This will result in increased warehouse consolidation throughout the country and the onset of major logistic hubs. Furthermore, GST news sources have stated that the implementation of this tax system will benefit logistics operators, eCommerce players, and eventually the consumer. While it’s fair to assume that the GST could disrupt the current ecosystem, it will become considerably more competitive and efficient. It is being considered as a positive aspect that will accelerate the growth in the logistic industry. However, clarity on the supply chain management during the transition phase along with warehousing and credit allowances will bring stability.

 



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