GST regime to boost logistics sector

Presently, the supply chain in India is driven more by tax savings reasons than by logistics efficiency, driving up the transport and warehousing costs.

Presently, the supply chain in India is driven more by tax savings reasons than by logistics efficiency, driving up the transport and warehousing costs. Introduction of the proposed Goods and Services Tax (GST) would change the rules of the game for logistics sector in India, believe experts.

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The present Central Sales Tax (CST) is levied on inter-state sale transactions, forcing manufactures to keep separate inventories to avoid tax burden. But in doing so, they have to endure warehousing, supply chain costs. The GST, on the other hand, proposes to be a comprehensive indirect tax on manufacture, sale and consumption of goods and services nationally.

“With introduction of GST and abolition of CST, trade boundaries between states will not exist and companies can consolidate their supply chains. It would facilitate seamless supply across supply chain and across state,” said Bijal Doshi, India Head, EuroMax Capital, an investment banking firm.

“GST would increase the importance of logistics for the manufacturing sector. Presently, most large manufacturing firms have regional warehouses of their own to avoid inter-state taxes, but under GST they can streamline their operations and outsource their supply chain requirements to logistics firms, leading to savings of up to 20 per cent,” said Shiraz Bugwadia, Director, O3capital, an investment banking and financial services firm.