Browsed by
Tag: Logistics Industry

Transport performance up through 30% way to GST: Narendra Modi

Transport performance up through 30% way to GST: Narendra Modi

Narendra Modi: GST
The Prime Minister, Shri Narendra Modi addressing the Nation on the occasion of 71st Independence Day from the ramparts of Red Fort, in Delhi on August 15, 2017.

The Goods & Services Tax (GST), which was rolled out in India on July 1, and its beneficial impact on the transportation sector has, for the second time, found mention in prime minister Narendra Modi’s nation-wide comments.  

Following up on the subject first addressed in the ‘Man Ki Baat’ radio programme on July 30, the prime minister spoke about the considerable reduction of time and costs following GST within barely 45 days of the implementation of the reformative tax.

The abolition of inter-state check-posts after the implementation of GST has reduced time for movement of goods by 30 percent and saved thousands of crores of rupees, prime minister Narendra Modi said in his address to the nation from the ramparts of the Red Fort on the occasion of the 71st Independence Day on August 15, as reported by PTI.

GST, which unified more than a dozen central and state levies, is a result of cooperative federalism and its smooth rollout from July 1 has increased efficiencies of business, he said, adding that technology has made the rollout smooth in a short span of time.

Modi said crores of people are behind the success of GST and the implementation of the new indirect tax regime is an example of the benefits that can be reaped if there is cooperative federalism in place between the Centre and states.Business efficiency, he said, has increased. “Efficiency has increased in the transport sector by 30 percent and because of GST such a big change has happened,” he said.”Trucks (carrying goods) are saving 30 percent (travel) time post GST as check-posts have been removed. This has helped save thousands of crores of rupees and more importantly time,” he said.

The biggest tax reform since Independence, GST was rolled out from July 1. The new indirect tax regime has subsumed over a dozen state and central levies like excise duty, service tax and VAT, and has replaced them with four-tier tax structure of 5, 12, 18 and 28 per cent for goods and services across the country.

Removing barriers and cutting costs
GST has removed inter-state barriers to convert India into a single market where goods and services can flow seamlessly. State border check-posts scrutinised material and location-based tax compliance, resulting in delays in delivery of goods and cause environment pollution as trucks queue up for clearance.

In pre-GST India, a typical truck spent 20 percent of its plying time at Interstate check-posts. On an average, a truck in India runs for around 60,000 kilometres as against 200,000km per annum in developed markets of Europe – very inefficient for the fleet owner. Now, with inter-state check-posts removed in around 22 Indian states, the travel time of long-haul trucks are down by around a fifth. As compared to a M&HCVs doing 225km on a typical day, some truckers claim to be clocking between 300-325km a day, a considerable improvement, which can only get better in the days to come.

What’s more, in the pre-GST times, a complex tax structure and considerable paperwork forced the transport industry to spend nearly 50-60 percent of resources on tax compliance and deposit of interstate sales tax. Now, with monitoring, collection of sales tax at interstate barriers obviated, a single GST means increased uptime for trucks, better turnaround and an optimised warehousing structure.

In the pre-GST era, the sector had to bear heavy logistics costs estimated at about 14 percent of the total value of goods as against 6-8 percent in other major countries. It is expected that logistics cost will come down to 10-12 percent of the total value of goods now.  The proposed E-way Bill is set to ease the movement of freight further. Goods worth more than Rs 50,000 will require online registration and the receipt would act as a goods ticket for the entire journey.

 


XaTTaX GST e-filing software – Simple, Secure, Reliable

Source: http://www.autocarpro.in/news-national/transport-efficiency-thanks-gst-pm-narendra-modi-25801
GST Bill : Opportunities for Indian Logistics Industry

GST Bill : Opportunities for Indian Logistics Industry

GST Impact on Logistics Sector in India

India set a benchmark in providing the lower cost services irrespective of any specific field still India has higher logistics cost due to various issues and challenges faced by the industry. India is involved in complex tax structure, the industry is also affected by poor rate of customs efficiency of clearance processes and procedures thus affecting the international export logistics stratum. however, insignificant comfort provided by the existing Indian infrastructure combined with lack of implementation of efficient IT-enabled tracking and tracing operation has saturated the efficiency of logistics and transportation.

The proposed goods and services tax (GST) will help companies reduce logistics cost by 1.5 to 2.5% as they reconfigure their supply chains and bring in three key structural changes to the logistics industry. First, as India becomes one big market, there will be fewer and larger warehouses. Second, it will lead to a larger number of bigger trucks on road as there is greater adoption of the hub-and-spoke model. Third, these changes will lead to greater economies of scale for transport operators and lead to more companies outsourcing their logistics operations.

Eliminating delays at check posts will yield an additional savings of 0.4-0.8% of sales. These cost savings are, however, more likely to be gradual and back ended, as corporate will have to realign their supply chain while ensuring minimum business disruption, it added. The impact of GST in logistics is going to be dramatic and revolutionary.

Interstate tax burden Currently, each of India’s 29 states taxes goods that move across their borders at different rates apart from that Corporate state tax of 2% is imposed for inter-state goods transfer. Not applicable. Uniform taxation and no varying tax structures would be allowed across states.

Currently, there are around 20-30 warehouses per company, one in every state, in addition to this 20-30 Carry & Forwarding agent per state making the supply chain longer and inefficient. GST tax will be imposed on transportation of goods and full credit will be available on interstate transactions.

Logistic costs are expected to be decreased by 1.5- 2.00% of sales on account of optimization of warehouses leading to lower inventory costs which are set up across states to avoid paying 2% corporate sales tax and phasing out of interstate sales tax. There is immense scope for optimization of costs.

How technology will play its role

The planned GST system seeks to replace multiple taxes and tariffs for a single tax at the point of sale. GST will unleash a new era of developing logistics infrastructure and take investments to the next level. The regulatory reforms proposed in the GST presents an opportunity to re-engineer logistics and transportation networks. Current inefficient and longer supply chains with warehouses in almost every state will now change based on delivery and cost efficiency. GST, when implemented, will free the decisions on warehousing and distribution from tax considerations and here the technology will play its role in the following cases –

  • East tracking of consignments
  • Managing complete Hub and spoke model
  • Centralized accounting.
  • Effective system to manage warehouse because warehouses will be fewer but larger.
  • Outsource the logistics operations.

This will result in more efficient cross-state transportation with improvement in transit time. Reformation of paperwork for road transporters Cost efficiency to optimum use of assets. This will lead to changes in Logistics Network Redefinition. Logistics service providers to rethink their business operations.

Impact of proposed GST on Indian Logistics Industry

Impact of proposed GST on Indian Logistics Industry

Overview of Indian Logistic Industry:

Logistic Industry Impact

The Indian logistic industry is expected to grow steadily, led by e-commerce penetration, economy revival, proposed GST implementation and government initiatives like “Make in India”, National Integrated Logistic Policy, 100% FDI in warehouses, food storage facilities, etc. Transportation alone holds 60% share of the logistic industry and rest 40% is contributed by warehousing, freight forwarding, value-added logistics, etc. Furthermore, with respect to India’s GDP growth the logistics industry is expected to grow at 1-1.5x as logistics business is directly correlated with economic activity. Considering the aforementioned aspect, the Indian logistic industry is projected to grow at CAGR of 15-20% during FY16~FY20. Despite these reasons, the logistic sector in India remains entangled in several complexities which primarily includes higher logistic costs and complex tax structure. The implementation of Goods and Service Tax (GST) bill is expected to trim the logistic costs upto 20% from the current levels, however, the persisting high logistic costs could only be resolved by development of logistics infrastructure.

The Indian logistic sector is primarily categorized into four segments comprising transportation, warehousing, freight forwarding and value-added logistics. The transportation which contributes maximum to the whole pie of logistic sector comprises various means such as road, rail, air and water. India being emerging country with prime dependency upon transportation through land, i.e. through road and rail together which contributes about 60% followed by Warehousing 24.5% compromising industrial and agricultural storage.

Segmentation of India Logistic Industry

Segmentation of India Logistic Industry

Current Issues and challenges

Despite being a lower cost service providing country, India has higher logistics cost due to various issues and challenges faced by the industry. Apart from being entangled in complex tax structure, the industry is also affected by poor rate of customs efficiency of clearance processes and procedures thus affecting the international export logistics stratum. Furthermore, sub-optimal comfort provided by the existing Indian infrastructure combined with lack of implementation of efficient IT-enabled tracking and tracing mechanisms has adversely affected the performance of logistics. The current article delineates upon the complex tax structure issue faced by the logistic industry and the benefits that this industry would derive upon implementation of GST, thus providing respite to certain extent to the industry.

Complex tax structure:

Currently, each of India’s 29 states taxes goods that move across their borders at various rates. As a result, freight that moves across the country is taxed multiple times.

Tax Structure

How the introduction of Goods and Service Tax (GST) would benefit the Indian logistic industry?

Goods and service tax is a colligation of multiple taxes levied by both Central (i.e, excise duty, countervailing duty and service tax) and state (Value-added tax, Octroi and entry tax, luxury tax, etc) governments when an end-user purchases goods or services. It means same level of taxation would be charged on a specific product or service across the entire country irrespective of being manufactured and sold in different states. The planned dual GST model (central GST and state GST) proposes to replace around 29 state and federal taxes and tariffs for a single tax at the point of sale. The current combined Centre and State statutory rate for most goods works out to be 26.5% (Cenvat of 14%, and VAT of 12.5%), whereas post GST implementation the same is expected to reduce to standard rate of about 18-21% which will be levied on most goods and all services.

Inter State Taxable Supply

CGST: Central Goods and Service Tax; SGST: State Goods and Service Tax; CVD: Countervailing Duty; SAD: Special Additional duty

The following table illustrates the expected benefits that Logistics industry would derive post implementation of GST:

pre GST and post GST

The rollout of GST, in India would dissolve the existing indirect tax structure, ie, multiple taxes that is being split between center and state governments leading to reduction of about 20% of current logistic costs.

Impact of GST on Third party Logistic service providers (3PL):

Post GST implementation the 3PL’s would have to restructure its assets and realign its operations in line with changes in the operations of its customers in the new scenario. Currently, 3PL’s have warehouses located near major distribution centers of its key clients (different industries) irrespective of its geographic disadvantage mainly to avoid interstate taxes. However, post GST implementation 3PL’s are expected to build integrated warehouses at logistic suitable locations. So accordingly, 3PL’s would have to restructure the assets to accommodate the long distance consignments which will occur with this scenario of free movement of goods across the country.

The consumer durables sector is expected to witness maximum drop in the logistics costs as percentage of total sales, as their warehouses are built at different states to avoid interstate tax. Mostly, the consumer-oriented industries are going to have high impact of GST on its operations model rather than capital intensive industries.

Major Challenge –To sail the GST bill through the headwinds of political and democratic embroilment:

The GST bill although has passed its acceptance through Lower House in May 2015 after religious deliberations, it is yet to be passed by the upper house of the parliament (Rajyasabha). Post this, bill has to be passed through respective state governments in state assemblies and it has to be ratified by at least 50% of them. Once the bill receives approval from majority of the state assemblies, the government has to arrive at a revenue neutral rate so that the implementation of the proposed new tax structure will not have negative implications on revenues of states and central. Furthermore, the government has to formulate the principles for levy or exempt of the tax in the course of interstate trade with consistency and relevancy the rules for ‘Place of supply’. After traversing through all the aforementioned phases, once the draft GST bill is out, the Central government has to compile all the views of the stakeholders and make an error- free and uniform GST legislation.

The hurdles and milestones which the bill has to face and cross before it is actually implemented is a tedious and time guzzling task at every stage of passage lest there is drive to expedite the same.

Apart from above the success of GST depends upon robust IT network connecting all the state governments, trade, industry, financial institutions, etc. The development of real time business model by the special purpose vehicle in the name of Goods and service tax network (GSTN) promoted by Government of India, various state Government bodies and non-Government financial institutions plays a vital role.

Source : Care’s Rating

GST boost for logistics

GST boost for logistics

April 1, 2017, marks the beginning of the new financial year (FY) 2017-18. In many ways, FY 2017-18 is going to be a landmark one. First, this would the first FY when the budgetary outlays are available for expenditure right from the onset. This was made possible by preponing the Union Budget and realigning Parliament sessions to facilitate early passage of the Finance Bill 2017. Second, after decades of work in progress, Goods and Services Tax (GST) is finally expected to be rolled out from July 1, 2017. Possibly the biggest and boldest tax reform since Independence, GST seeks to overhaul the indirect taxation regime. And the logistics sector is likely to be one of its biggest beneficiaries.

Studies estimate the average logistics cost in India to be around 13-14 per cent of GDP. This is much higher compared to other developed countries (which is around 8-9 per cent of GDP). Though various issues contributed to this, the structure of indirect taxes that exists today is a significant cause. Currently both Centre and states levy a bunch of taxes on goods. Note that we are saying “goods” here, as states are not empowered to levy service taxes. To continue, Centre’s levy includes taxes such as Excise, Customs, and Central Sales Tax, while states levy includes VAT/Sales tax, Octroi, Entry tax and Luxury Tax. Additionally, both Centre and States may levy other duties, cesses, surcharges over and above these. While levy of multiple taxes by Centre and states itself makes the tax structure complex, limitations to offset taxes paid along the value chain amplifies the problem further. For example, excise and VAT cannot be offset. So they cascade. So taxes get levied upon taxes. Further, it is difficult to claim VAT credits across states. For the Indian Logistics industry, these inherent complexities lead to the following: (Refer Table: inset).

The GST is poised to be a game-changer for the logistics industry. With GST, India will become a seamless unified market without any difference between inter-state or intra-state sales. This will essentially disrupt the existing inefficiencies and facilitate structural re-engineering of the logistics network. Service providers would be incentivised to leverage hub-and-spoke supply chain networks by operating large central warehouses and remodeling transportation routes. This can enable increased consolidation in the industry with large players operating efficiently. Phasing out the inter-state check posts would significantly reduce transportation costs and enhance “ease of doing business”. For industries, this would mean lower logistics cost and possible opportunities for increasing margins and/or reducing prices. For government agencies, all this may translate to increased formalisation and tax compliance. In fact, independent analyst estimates suggest that GST implementation can reduce overall logistics cost by around 30-40 per cent, thereby leading to an overall saving of about 0.3-0.4 per cent of GDP. All this would ultimately benefit the public.

That said, there are still some issues that need to be resolved. The All-India Transporters Welfare Association (AITWA) and All India Motor Transport Congress (AITC) had recently organised a technical session on GST. The authorities were apprised of key areas that need more clarity. There could be some teething troubles but the government is determined to sort all these as we go along. Meanwhile, there is another interesting development. The government is reportedly considering changing the fiscal year from April-March to Jan-Dec. An expert committee has recently submitted its recommendations which is yet to be made public. But, if the government does go ahead with effecting this change, then FY 2017-18 could as well be the last FY to start from 1st April. Will this impact the existing scheme of GST? Mostly should not, but we are not sure. Only time will tell.

Source : DNA

GST Impact On The Logistics Industry

GST Impact On The Logistics Industry

logistics industry

India set a benchmark in providing the lower cost services irrespective of any specific field still India has higher logistics cost due to various issues and challenges faced by the industry. India is involved in complex tax structure, the industry is also affected by poor rate of customs efficiency of clearance processes and procedures thus affecting the international export logistics stratum. however, insignificant comfort provided by the existing Indian infrastructure combined with lack of implementation of efficient IT-enabled tracking and tracing operation has saturated the efficiency of logistics and transportation.

The proposed goods and services tax (GST) will help companies reduce logistics cost by 1.5 to 2.5% as they reconfigure their supply chains and bring in three key structural changes to the logistics industry. First, as India becomes one big market, there will be fewer and larger warehouses. Second, it will lead to a larger number of bigger trucks on road as there is greater adoption of the hub-and-spoke model. Third, these changes will lead to greater economies of scale for transport operators and lead to more companies outsourcing their logistics operations.

Eliminating delays at check posts will yield an additional savings of 0.4-0.8% of sales. These cost savings are, however, more likely to be gradual and back ended, as corporate will have to realign their supply chain while ensuring minimum business disruption, it added. The impact of GST in logistics is going to be dramatic and revolutionary.

Interstate tax burden Currently, each of India’s 29 states taxes goods that move across their borders at different rates apart from that Corporate state tax of 2% is imposed for inter-state goods transfer. Not applicable. Uniform taxation and no varying tax structures would be allowed across states.

Currently, there are around 20-30 warehouses per company, one in every state, in addition to this 20-30 Carry & Forwarding agent per state making the supply chain longer and inefficient. GST tax will be imposed on transportation of goods and full credit will be available on interstate transactions.

Logistic costs are expected to be decreased by 1.5- 2.00% of sales on account of optimization of warehouses leading to lower inventory costs which are set up across states to avoid paying 2% corporate sales tax and phasing out of interstate sales tax. There is immense scope for optimization of costs.

How technology will play its role

The planned GST system seeks to replace multiple taxes and tariffs for a single tax at the point of sale. GST will unleash a new era of developing logistics infrastructure and take investments to the next level. The regulatory reforms proposed in the GST presents an opportunity to re-engineer logistics and transportation networks. Current inefficient and longer supply chains with warehouses in almost every state will now change based on delivery and cost efficiency. GST, when implemented, will free the decisions on warehousing and distribution from tax considerations and here the technology will play its role in the following cases –

  • East tracking of consignments
  • Managing complete Hub and spoke model
  • Centralized accounting.
  • Effective system to manage warehouse because warehouses will be fewer but larger.
  • Outsource the logistics operations.

This will result in more efficient cross-state transportation with improvement in transit time. Reformation of paperwork for road transporters Cost efficiency to optimum use of assets. This will lead to changes in Logistics Network Redefinition. Logistics service providers to rethink their business operations.

× How can I help you?