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