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GST, a game-changer reform for logistics sector

GST, a game-changer reform for logistics sector

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It has been 15 months since the rollout of what is considered one of India’s biggest tax reforms — the Goods and Services Tax (GST). But, we are already witnessing a major positive transition in the logistics sector.

Outsourcing and the value addition in the logistics sector is set to take off post-GST. Considering the double-digit growth, the logistics market would exceed $250 billion in the next two years. As per a recent survey, the Indian logistics sector provides livelihood to 22 million-plus people, which is expected to be over 40 million by 2020. The high rate of growth in the next couple of years is expected largely due to the implementation of GST.

GST has replaced at least 7 indirect tax heads and has eliminated the need for warehouse hubs across States. Further, GST has eliminated check posts across the nation and thereby waiting time, leading to at least 12-15% reduction in the turnaround time of trucks.

Better utilization of assets like vehicles and warehouses will lead to efficiency and increased productivity thus lowering overall cost. This would considerably benefit the supply chain directly and India’s growth indirectly.

The manufacturing and other services sectors have now started planning their supply chains, bearing in mind fleet cost and fast delivery, rather than tax structure and compliance.

Competitive edge

Pre-GST, the Indian logistics sector was struggling to add value to customers, compared to global peers. Indian firms were seen as labor contractors or mere transporters, which denied them the benefits of being a part of the supply chain. But the equation has changed now.

Manufacturers are looking to optimize supply chains and are willing to outsource value-added planning to logistics players, who have invested in technology and operate with a focus on quality and compliance. These logistics players are seeing a positive shift in the mindset of their clients and are gaining momentum. Further, small transporters can also now work with third-party logistics (3PL) providers and expand their fleet. GST has aided this move at a faster clip.

Post GST, there is a marked improvement in the use of technology and digitization by logistics players. 3PL players can become real ‘differentiators’ as they embrace technology to enhance the visibility of load carried, turn-around time, vehicle utilization, improvement in loading/unloading time by removing congestion at the docks, and the like.

Equipped with technology and software for load design solutions, vehicle geo-tracking, inventory (order/part level) tracking and route optimization, 3PL players add more value to their customers’ supply chain.

Logistics costs have been one of the biggest stumbling blocks for Indian manufacturers eyeing exports. At about 13-14% of GDP, India’s logistics cost is high and compares with about 8% in advanced nations that have efficient systems. This despite the percentage of outsourcing being higher in developed markets.

The Centre has made clear its intention to bring down this cost to less than 10%, which would make Indian manufacturers globally relevant.

The Centre created a new division in the Commerce Ministry to deal with the integrated development of logistics and urged all stakeholders to bring to India relevant best practices to enhance efficiency in logistics.

This is a good move as logistics firms used to deal with six different ministries separately and each would require separate paperwork and formalities. It is a big sense of relief to note there will soon be a system where a single document would be accepted for multi-modal logistics within India.

India has moved from the 54th position in 2014 to 44th in 2018 in the World Bank’s Logistics Performance Index.

Infrastructure status

The much-awaited ‘infrastructure’ status to the sector was conferred in November 2017, which is helping the sector avail cheaper finance (2% lower) for its warehousing and cold storage needs.

This will bring in a lot more players with an integrated service approach that would again help Indian manufacturers. New investments in this sector is good news as it could create a lot more jobs in the near future.

Together, the implementation of GST and other reforms have already started bringing efficiencies into the supply chain of various firms. Digitization, asset utilization, and visibility enhancement are facilitating better value-added outsourcing to logistics firms.

The government, too, has realized that aspirations for economic growth, employment generation, manufacturing, and exports are all inextricably linked to the efficient management of logistics.


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Source: The Hindu
Author: T V Sundram Iyengar 
Transport performance up through 30% way to GST: Narendra Modi

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

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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.

 


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Source: http://www.autocarpro.in/news-national/transport-efficiency-thanks-gst-pm-narendra-modi-25801
Transport sector to benefit from GST in a big way: Ministry of Road Transport and Highways

Transport sector to benefit from GST in a big way: Ministry of Road Transport and Highways

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Ministry of Road Transport and Highways : GST

Ministry of Road Transport and Highways has prepared a booklet on the benefits of GST for the transport sector.

The unified tax regime has obviated the need for interstate check posts.  This will result in reducing the travel time of long-haul trucks and other cargo vehicles by at least one-fifth, said the booklet.

“This, coupled with the proposed E-way bill that will require online registration for movement of goods worth more than Rs 50,000, will ease the movement of freight further, and bring in more transparency in the whole process” it added.

The booklet also said that efficient freight movement will also boost the demand for high tonnage trucks, which will in turn reduce the cost of transportation of freight.


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A single GST also means an optimized warehousing structure. Earlier, companies had to maintain warehouses in every state due to different taxation slabs, said the report.

Pre- GST, the statutory tax rate for most goods worked out to about 26.5%. Post GST most goods are expected to be in the 18 % tax range, it added.

According to Nitin Gadkari, the Minister for Road Transport & Highways and Shipping,  India’s logistics sector would gain the most from the Goods and Services tax as costs would fall by almost 20%.

He has also said that logistics parks are being set up at various places across the country to act as freight aggregation and distribution hubs. These logistics parks will enable long haul freight movement between hubs on larger sized trucks, rail and waterways.


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Source :  SME Times
Logistics Associations meet GST Working Group; seek exemption for Export-Import trade services

Logistics Associations meet GST Working Group; seek exemption for Export-Import trade services

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logistics

In a bid to ensure the smooth implementation of GST, the Central Board of Excise and Customs (CBEC) on 24 March, 2017 constituted ‘GST Working Groups’ to interact with select industry sectors to address their concerns relating to GST implementation issues. Accordingly, the Government designated officers to address issues relating to certain identified sectors like transport & logistics, to submit their report by April 10, 2017.

On April 4, Mr J. M. Kennedy, ADG, DGR, Working Group, Transport & Logistics-GST had an interactive meeting in Chennai with the Logistics Industry leaders from Federation of Freight Forwarders Associations in India (FFFAI), Air Cargo Agents Association of India (ACAAI), Association of Multimodal Transport Operators of India (AMTOI) and Consolidators Association of India (CAI). FFFAI was represented by Mr Samir Shah, Chairman; Mr A.V.Vijaykumar, Vice Chairman and Mr S Ramakrishna, Vice Chairman. Also present at this meeting was eminent tax consultant and advocate Mr Vatheeswaran to represent the industry.

Welcoming the basic objective of the tax reformation called Goods and Services Tax (GST) as a revolutionary step, the associations maintained that there are certain provisions in the proposed GST Law causing concerns for freight forwarding, customs broking, logistics services and manufacturing & exports industry in the Country.

The joint delegation emphasised on exemption from new tax burden to be levied by GST structure on the freight forwarding, customs broking and logistics industry as a whole, which hitherto have been exempted to make Indian manufacturing & export less expensive and competitive in the international market.

The association leaders pointed out that currently, freight forwarding in the air and sea cargo segment there is no Service Tax, based on Rule 10 of the ‘Place of Provision of Service Rules 2012’, which provides that in respect of taxation on transportation of goods (other than mail or courier) criteria should be the ‘Place of Destination of Goods’. In the freight forwarding segment including air and sea cargo pertaining to export of goods from India, the place of destination is outside India and, as a result, Service Tax is not payable. This aspect was also confirmed by CBEC by a Circular issued on August 12, 2016.

However, the proposed GST law plans levy of GST on International transportation as well as freight forwarding which is in variance with the GST Provisions in other countries as well.

In addition, in the international air segment all airlines have registration in India and when a freight forwarder purchases an air freight slot/space from the airline, the tax would be applicable as per GST rate on services. Currently, there is no tax imposed on freight forwarders for the same.

The associations further observed that GST on freight forwarders will only be passed on to exporters resulting in exports from India to be more uncompetitive, defeating the objective of GST and ‘Make in India’.

Similarly, levy of GST on import cargo would also result in double taxation (since on the entire freight, customs duties are being levied under Section 14 of the Customs Act) affecting re-export or Export-Import trade.

Concern over Registration and Data/Return Filing:

The GST Law indicates that SGST registration could be required in every State where there is a supply of goods or services or both. Currently, for service providers, the law provides for a centralised registration and compliance. The rule exists in view of the fact that logistics related services, especially in Export-Import trade, are different from the traditional manufacturing sector.

It has also been noted that under the GST regime supplier will have to file data online on 10th and  15th of every month and a monthly return on 20th apart from an annual return. This would mean 37 filings per State if Statewise Registration is implemented. In addition, if TDS and ISD is applicable there would be 61 filings in a year per State.

Highlights of the recommendations:

•             International transportation of goods by all modes including freight forwarding should be zero rated. Alternatively, both international transporting pertaining to that should be exempted

•             Ancillary services related to international transportation of goods like customs clearances, warehousing, storage, cargo handling, packing, unitisation, port, airport, terminal etc should be zero rated or exempted

•             Concept of centralised PAN based registration must be retained whereby service providers in the international transport segment can have a centralised registration and discharge applicable taxes through GST portal

GST: How it will impact Indian startups

GST: How it will impact Indian startups

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Indian startups have welcomed the passage of the four GST bills in Lok Sabha this week, claiming the unified tax will ease logistics and compliance.

Indian Startups

Even as the government is still deliberating on the list of over 5,000 goods that will be taxed under the upcoming Goods and Services Tax (GST), Indian startups have welcomed passage of the Bill, which they feel will simplify conduct of business.

Startups believe it will simplify taxation in the long term, reduce cross-border corruption between states, and let them claim the credit on taxes paid on expenses in their companies.

Major taxes like excise duty, octroi, service tax, special additional duty and VAT (value added tax) will be subsumed into a single tax called GST, which likely to be applicable from July 1, 2017 onwards.

“In the short-term, it may increase compliance as sellers would have to file a return thrice in a month, compared to once in six months, at present,” said Navin K Rungta, co-founder of eLagaan. “Sellers would have to report their monthly sales by the 10th of each month, purchases by the 15th and a consolidated statement by the 25th of each month,” said Rungta.

“Sellers would have to report their monthly sales by the 10th of each month, purchases by the 15th and a consolidated statement by the 25th of each month,” said Rungta.

This might increase compliance in the short term as software to automate all such processes are still being built. Startups which provide services will also benefit from the service tax exemption limit has been raised to Rs 20 lakh from Rs 10 lakh earlier.

Grocery retailing startups have also welcomed the passage of GST Bill. “The government has allowed 100 percent FDI in food retailing. When that comes through, we have a lot of service tax credit. That service tax credit will get converted into GST credit. Today, we are not able to offset service tax credit against anything else. That will give us a lot of tax advantage,” said Ashneer Grover, chief financial officer, Gurgaon-based Grofers.

Logistics sector to benefit

Removal of a lot of taxation bottlenecks at state borders through one tax will make India as one market. It will also reduce anomalies of the price difference of goods between states.

Taxation software startups will also get a fillip. “Many startups are into e-commerce and their logistic costs goes up with 11 categories of taxes levied on the road transport sector. GST can reduce logistic costs of companies producing non-bulk goods by as much as 20 percent,” said Mohit Bhambani, CEO of tax compliance solution firm KDK Softwares, which is developing GST compliant software.

Online marketplaces have already started educating their sellers on GST compliance. Vishal Chadha, Senior Vice President, Business at Snapdeal said, “The GST is one of the most wide-sweeping reforms launched by the government of India in the recent times, and will deeply affect how business is conducted and reported in our country.”

Snapdeal has already launched a webinar called ‘GST Guru’ to educate its sellers on the compliance on the upcoming tax.

“India has always fared badly on ease of doing business. GST will greatly work in that direction. There will be a single tax that startups will have to comply with besides reducing payment compliance etc,” said Preeti Khurana, a chartered accountant who works with Bangalore-based Cleartax.

Currently, startups in the manufacturing sector have to adhere to a lot of state regulations besides having to pay state taxes. Khurana also said that many states have a threshold beyond which startups have to register for VAT, if you had a turnover of Rs 5 lakh. Under GST the proposed threshold is Rs 20 lakh.

“Majority of the manufacturing sector is unaware of GST and its benefits. It is essential for the manufacturing units to first educate themselves and then adopt technological advancements to comply with the same,” said Rahul Garg, Founder and CEO of Ratan Tata-backed marketplace Moglix.

GST impact startups

Sellers and marketplaces divided

Online sellers are happy with the move. Startups can also offset total tax liability against tax paid on expenses such as office furniture, which was currently not possible.

“Sellers selling product at a loss will be discouraged, reducing fraud. Tax collection at source (TCS) for online marketplaces will ease business for sellers,” said a source in All India Online Vendors Association, requesting anonymity.

Marketplaces such as Amazon, Flipkart and Snapdeal have resented the 2 percent tax collection at source (TCS), saying that sellers should be required to pay this tax.

“None of us is saying GST is bad. It’s going to be good for the country. Our capital will be locked in the system (with TCS) which will also affect sellers. E-commerce companies can share information (about the sellers and their sales) with state and central government who can claim taxation from them,” said Sachin Bansal, co-founder of Flipkart recently in a joint conference with heads of Snapdeal and Amazon India.

However, major benefits are expected in the movement of e-commerce goods between states. Delivery is likely to be faster and cheaper as companies will incur major boost when transportation will shift back to the road than air being used currently.

“Every state has its own taxation system. Every time a truck passes through a state border it involves heavy taxation and paperwork. Warehouse location is kept in accordance with the state taxation and amount of business from a particular area. With GST coming in the entire country will be one without any tax boundaries,” says Raghav Himatsingka, CEO and Founder, Truckola.

Source : Money Control