Indian Logistics sector is expected to grow at a CAGR of 8.6 percent between 2015 and 2020 which is a sharp decline from the previous growth rate of CAGR of 9.7 percent during 2010-2015. In fact, the present condition of Indian logistics sectors is if not miserable than of course not good as well. Most of the Logistics and supply chain industries are suffering from heavy financial losses. This entire industrial domain is fragmented and underdeveloped.
Logistics costs are extensively high, especially due to poor infrastructure, lack of physical communications; rising fuel prices, higher dwell time at ports; degraded containerization; and a multi-layered and retrospective tax system which significantly contributes to additional delays at border crossing points.
However, the advent of Goods and Service Tax along with several government reforms and initiatives such as the promotion of manufacturing and trade and the improving investment climate are expected to transform the industry and drive growth between 2016 and 2020. Besides these, the development of smart transportation networks and various logistics-infrastructures such as dedicated freight corridors, logistics parks, free trade warehousing zones, and container freight stations are also seen as the key element to bring further improved efficiency.
IMPACT OF GST IN GENERAL
ELEVATED TAX BASE: GST is a multi-dimensional or a multi-stage taxation system, providing an input tax credit mechanism. Under the purview of this new reform, each and every link within the value chain, including the dealers and as well as the distributors, are bound to show the evidence of compliance by its preceding link so that they can claim the required set-offs. This is likely to broaden the tax base by increasing voluntary compliance.
GST WILL BOOST DIRECT TAX: The implementation of Goods and Services Tax is going to result in maximized direct tax collections. This is simply because:
- GST payments done by taxpayers will be directly linked to their respective Permanent Account Number (PAN).
- Apart from that, The National Securities Depository Limited (NSDL), which is directly responsible for the maintenance of the Tax Information System (TIN), will also look after the GST database.
- Such an amalgamation of the indirect and the income tax system will make the authorities enable to triangulate information, thereby automatically resulting to better and smarter tax buoyancy.
BENEFITS FOR INDIAN ECONOMY:
The structure of this tax reform is likely to facilitate a better environment for doing business in India over time, providing a smart platform for maximized economic growth.
This new reform will cut down costs within the system, deliver more control to the government on taxation, and reduce unaccounted forms of an economy which later could be utilized to fund developmental projects in India and strengthen its competitive potential within the global economy.
INFLATION AT THE INITIAL STAGE:
At the initial stage of its implementation, GST could bring more negative impacts. Industries like Logistics and supply chain will face serious inflation; however, this impact should be transitory.
IMPACT OF GST ON LOGISTIC COMPANY:
The main aim of Goods and Services Tax (GST) is to squeeze India’s multi-layered indirect tax system into a singular tax structure. It is expected that this will unshackle Indian Logistic and supply chain companies from the corrupt bureaucratic web and bring back an amicable environment for the ease of doing business.
MODEL OF LOGISTIC INDUSTRY AFTER GST
The proposed goods and services tax (GST) would help Indian industries to reduce their logistics costs, just by restructuring their supply chains with four key structural changes.
- As a result of GST India will become a unified market, so there will be lesser but bigger warehouses.
- Larger transportation vehicle will be there on roads, while the overall number of vehicles will go down.
- This proposed tax reform will provide extra leverage for greater adoption of a hub-and-spoke model in various segments such as warehousing, cold chain, container freight stations and inland container depots.
- GST will help to cut down the overall cost of logistics companies, resulting a lot of savings, stoppage of wastage and lower delays.
- These above changes will lead to greater economies of scale for transport operators and lead to more companies outsourcing their logistics operations.
COST Reduction & TIME-SAVING:
- With Bigger warehouses and the end-market driven logistics planning, Logistics companies are likely to get extra profit and additional costs savings over time.
- Abolishing the entry taxes and easier tax compliance will procedure ease of movement of goods across the length and breadth of the country.
Companies will be able to offer their services at lower costs. Companies for whom transportation is not the most essential and integral part of their business will begin to outsource their logistics operations, especially to several to 3PL & 4PL logistics companies.
With Standard tax rates, corporations will not be required to build warehouses in different states. In simple, They do not have to adhere to each state’s tax code.
As a RCPL Logistics Pvt Ltd an organized and leading player in the logistics industry, we are GST-ready, so whether it is with respect to the issue of invoice or receipt of payment, we will comply as required. We will support the government in all their initiatives.