Even as the GST Bill is stuck in the Rajya Sabha, the question is not whether, but when. All political parties are unanimous about the overall benefits of GST for India. According to estimates, the implementation of GST is likely to add nearly 2% to India’s annual GDP growth. Already at 7.5% India is the fastest growing large economies in the world , Imagine the impact of another 2% addition on a base annual GDP of $2 trillion. Surely the trickle-down effect will be tremendous. ( Technology in Transport )
At a basic level most industries are likely to benefit from GST as it makes the entire process of taxation simpler, less bureaucratic and efficient. But among the various industries, the one industry that will benefit the most is Transport and Logistics . For this sector the impact is not about rates of taxation or simplicity alone but for many years, the transport and logistics sector was designed and structured based on the state taxation system which made it inefficient and cumbersome. With GST, this will change as the entire transport and logistics infrastructure in India will become more competitive and optimal in terms of its structure.
Benefits of GST in Transport ? ( Technology in Transport )
The answer to that question could be more political than economic. But its benefits are indisputable. Greater up-time for trucks, less idle hours, faster turnaround and a more optimal warehousing structure will be the major advantages of GST for the transport and logistics sector. Mytrux is surely excited to add further value to the transport and logistics segment in the emerging post-GST scenario. As Mao Zedong said, “May we live in interesting times”.
How the current state tax structure has impacted this sector…
According to industry estimates put out in 2013, the logistics and transportation industry is worth $130 billion annually , but this industry is largely scattered and unorganized due to the nature of state level of taxation. Let us explain! The existing interstate taxation system has forced companies to create and maintain warehouses in each state, which makes the supply chain longer and largely inefficient. With this complex structure, today the logistics industry spends nearly 50-60% of its time in tax compliance, interstate check points manoeuvring, scrutiny and tracking of interstate sales tax. This has created an extremely paradoxical situation. Logistics and transport are support functions which are supposed to make the core operations of the business more efficient , but due to the current interstate tax regime, the logistics industry itself gets caught in a quagmire of compliances and regulations.
How GST can overcome these inefficiencies in logistics and transport…
Today the logistics industry has matured to encompass transportation, warehousing, distribution and optimization , However geometric growth is curtailed by these interstate tax structures. To begin with GST tax will be levied on transportation of goods and full credit will be available on interstate transactions. This will lead to a change in the logistics setup & will lead to concentrated mega logistic chains which will either be closer to the manufacturer or the customer. Making it more optimal and efficient GST will lead to centralization which will be easier to claim and utilize credits. Even from a tax compliance perspective, it makes the entire job simpler.
Mytrux sees itself as a key player in this new GST era with Technology for Trucking. By perfecting a seamless marketplace for transport, it will further optimize the logistics setup of companies and ensure economies of scale and cost through a better Trucking Experience. ( Technology in Transport )
GST will lead to a more organized logistics and transport segment…
The existing interstate tax system has resulted in a large number of unorganized players in this industry. With the introduction of GST, there is likely to be a major consolidation in this segment. It could see the emergence of a few large players who can span the entire logistics chain. This will be advantageous as it will lead to greater efficiencies, better use of technology and more cost advantages.
Mytrux again sees its Truck Tracking App playing a pivotal role in this trend. The exchange platform will enable larger players to consolidate and scale up much faster in the business. At the same time the smaller unorganized players will also have a critical role to play as intelligent expert extensions of the logistics players. The Mytrux.in platform can ensure that they can be easily integrated easily into the emerging logistics order.
The emergence of Warehousing Hubs…
The big shift post the GST regime will be that India will see the emergence of regional warehouse hubs. Unlike in the current regime, the manufacturer does not need to have a warehouse in each state, first transport to the warehouse and then sell to the distributor. With a single GST across India, one can envisage the emergence of key hubs. For example; A hub in Delhi can serve the North; A hub in Pune can serve the West; A hub in Kolkata can serve the East, A hub in Hyderabad can serve the South and Central India. In effect, the entire logistics activity becomes a lot more focused, concentrated and smarter.
At Mytrux we believe that transportation and warehousing could become increasingly product agnostic. This also opens up a huge opportunity wherein the online transport exchange will have to play with a number of algorithms to bring transporters, warehouses and users together.
GST will make transporting more efficient…
As the logistics industry undergoes a sea change, the transport industry is likely to benefit substantially. Lesser interstate compliance and reduced paper work will result in faster turnaround time for trucks. That directly adds to the bottom-line of the transporter. The GST will also lead to the transport industry getting more specialized. There will be the principal transporters who will connect the manufacturers with the hubs. Then there will be the subsidiary transporters who will move from the hubs to the distribution centres. Finally, there will be the last-mile transporters who will ensure customer delivery. This structure will lead to higher competitiveness, more efficient sourcing and Organized Trucking.
The Mytrux model sees a great role in this emerging scenario. The creation of three levels of transporters will require a series of smart algorithms to manage and execute in an efficient and seamless way. The platform can really add to the already existing efficiencies and optimization the GST is likely to trigger in the transport and logistics industry.