GST stands for “Goods and Services Tax”, and is a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. The main benefit of the GST is to facilitate a uniform tax levied on goods and services across the country. Currently, the indirect tax system in India has overlapping taxes levied by the Centre and the State separately. Taxes such as excise duty, service, central sales tax, VAT ( value added tax), entry tax or octroi will all be subsumed by the GST under a single umbrella.
GST is one of the biggest indirect tax reform & will lead to economic integration of India. However it requires a constitutional amendment, which requires a bill to passed in both houses of Parliament. T
he GST constitutional amendment bill was passed in the Lok Sabha in May 2015. However, it has been held up in the Rajya Sabha due to objections being raised by the Opposition. This Monsoon session of Parliament might succeed in passing the GST Bill.
GST rollout will help faster and cheaper movement of goods across the country with a uniform taxation structure. The logistic sector is primarily divided into four segments — transportation, warehousing, freight forwarding and value-added logistics. The transportation contributes the lion’s chunk of 60 percent of the logistic pie, followed by warehousing compromising industrial and agricultural storage at 24.5 percent. Packaging and other related businesses constitutes the rest of the segment.
1. Logistics industry is projected to grow at a compounded annual growth rate of 15-20 percent between 2015-16 and 2019-20 that will get a further boost if GST is rolled out from this year, which can trim costs by 20 percent, says Care Ratings report.
2. Cost can also come down drastically as a one-nation-one- tax GST structure can massively reduce the long and winding queues at border check-points and other entry points within and between the states.
3. Another reason for lower logistics cost is that operators will be able to rationalize and restructure their warehouses and other logistical infrastructure.
4. Due to trade barriers such as the entry tax, local body tax, Octroi and other hurdles, trucks idle for 30-40 percent of the day, leading to huge man-hour and fuel losses, says the report.
5. Since GST will be levied on goods transportation and full credit will be available on interstate transactions, logistic cost is expected to come down by 1.5-2 percent of sales due to warehouse optimization and the resultant lower inventory cost.
6. According to the report, the higher growth of the logistic industry will be driven by e-commerce, GST rollout, government focus on local manufacturing, the new national integrated logistic policy, and 100 percent FDI in warehouses, food storage facilities etc.
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