CHENNAI: Tamil Nadu, a major manufacturing state, is opposing introduction of goods and services tax (GST) fearing loss of revenue. But a report by global analyst firm Crisil says GST will benefit manufacturers as they will be able to save time and money in logistics.
GST will reduce logistics costs of companies producing non-bulk goods by 20%, it says. With the introduction of GST, the central sales tax, octroi etc will be subsumed (form part of GST) and therefore the manufacturers will have to pay less to the government in taxes. It will also save time, the report said.
Tamil Nadu government says it will lose Rs 3,500 crore annually due to abolition of CST and wants compensation from the Centre.
Non-bulk goods constitute goods other than coal, iron ore, cement, steel, foodgrains, fertilisers and petroleum products. Tamil Nadu’s ruling party the AIADMK was one of the few parties which voted against the GST bill in Lok Sabha and has vowed to oppose it in the Rajya Sabha.
“Manufacturers of non-bulk goods spend about 5-8% of sales on logistics. GST will save warehousing costs of 1-1.5% of sales in 3-4 years,” said senior director of Crisil research Prasad Koparkar.
Forecasting more savings with the introduction of GST, Koparkar said “eliminating check-post delays will yield additional savings of 0.4-0.8%, thus taking overall savings to 1.5-2% of sales. But this will be gradual and back-ended as companies will have to realign supply chains while ensuring minimum business disruption”.
But local lorry owners are not fully confident of reaping benefits from GST. “For trucks to derive full benefits of GST, petroleum and its associated products must form part of GST,” Tamil Nadu Lorry Owners Federation president K Nallathambi told TOI. “We fill diesel at a higher rate in some states due to the local taxes. If it is even across the country, it would benefit us,” he said.
Source: Time of india