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GST Positive For Logistics, Truck Stoppage Time To Reduce By 15-20%: Icra

GST may lead to higher preference for organised logistics companies, says Icra
GST may lead to higher preference for organised logistics companies, says Icra

Rollout of the new indirect tax regime - Goods and Services Tax or GST - will likely improve the flow of goods on account of reduction in turnaround time as value-added tax- or VAT-related check posts will be removed, domestic rating agency Icra has said. This may lead to 15-20 per cent reduction in truck stoppage time, it added. The new GST regime - scheduled to be implemented from July 1 - is likely to have a significant bearing on the way transportation and storage of goods happens across the country, said Icra, which expects a more efficient and organised logistics sector to evolve gradually.

"As the additional 2 per cent CST (central sales tax) levied on inter-state sale of goods cease to exist warehouse location would no longer be based on tax considerations and instead would be based on demand considerations - this would also result in consolidation of warehouses," Icra said in a statement. 

The upcoming GST regime will subsume many state-level taxes including central sales tax and value added tax. At the central level, the taxes being subsumed will include central excise duty and service tax. (Also readGST gains to be 'far less' than initially envisioned, says Nomura)

Icra listed three major implications of the implementation of GST for the logistic sector:

  • Consolidation of warehousing network and a shift towards a 'hub and spoke' model
  • Higher degree of tax compliance with business moving away from un-organized transportation service providers to organized sector
  • Creation of level-playing field between express and traditional transport services providers by virtue of input tax credit
Shift towards organised logistics companies 
(With inputs from PTI)