Evolving with e-commerce
Vijay Kumar, COO, Express Industry Council of India (EICI), speaks about how e-commerce is helping the express industry evolve and the domino effect that the impending GST might have.
Has the growth of e-commerce changed the way the express industry works in India?
Yes, and its growth has had a positive impact on the express industry simply because a door-todoor delivery is very critical. Recent reports show that e-commerce space should grow about 10 times in the next five years. Has it helped grow the express industry?
While e-commerce isn’t the only growth driver for the express industry, it is one of the bigger opportunity areas. A lot of SMEs need logistic providers for the express industry and with e-commerce growing, there is an automatic growth for the express industry. Internationally too, e-commerce provides a huge opportunity for our exporters – like micro and mini exporters. They probably work out of 100 sqft space. The pace with which these entrepreneurs are actually taking on the world is exciting to watch. But they can be successful only if they have someone to deliver their goods. E-commerce in effect is creating entrepreneurs and our members are providing a vital service for them. How has EICI helped evolve the industry?
Well, for one, we were the first ones to set up express terminals in Mumbai, Delhi and other major cities years ago – not just for our members but for the benefit of the entire trade. It was funded by us at a time when that initiative was completely lossmaking. Is there any issue that EICI is working towards?
One of the major initiatives we have undertaken is the relook at the Foreign Trade Policy 201520 where Directorate General of Foreign Trade had announced that commercial exports cannot go through courier. This probably makes India the only country to do so. So even small packages go through cargo and there is no expedited delivery. We have made representations to the Ministry to allow exporters to courier. What is your take on GST?
We are bullish about the longterm impact of the GST – if it comes the way we envisage it – it will be very good for us. However, we have identified a few concern areas. We need to move all border checkposts out. It leads to increasing transaction costs, and the trucks are idling, leading to inefficient operation. Would GST bring with it complications in documentation?
Our members are network operators serving pan-India. They pay Service Tax in one single registration to operate across the country; they don’t need multiple registrations. They take input credit against services which can be done anywhere in the country. It’s a seamless flow and it’s a very well established taxation regime. With GST, there seems to be multiple registrations in each state. That is going to be a killer for us. Members will have to register themselves in each state.
As far as GST returns are concerned, they will have to file a return every month. So instead of filing returns twice a year under Service Tax, under GST there will be one for IGST, one for CGST and one for state GSTs. This makes it three returns multiplied by 34 administrations.That is close to 900-odd returns. So it’s a huge compliance cost. Also, the oversight will be with 34 administrations. Instead of having an easy regime which facilitates business, here you are actually constraining business.
A lot of SMEs need logistic providers for the express industry and with e-commerce growing, there is an automatic growth for the express industry
Would GST have any effect on input credits?
Yes, there may be credit blockages with GST. Members will not be able to get whatever taxation that has gone into the input set off. So there will again be cascading of duties. The fact that GST is coming in is to do away with this cascading effect of duties. In this case, this will actually start happening. Another issue is specific to freighter operators and probably the airlines. It deals with ATF (even though we cannot claim input credit for petrol products) what they have done for ATF is the CENVAT credit, that is excise on ATF. There is an input credit that we can set off against the service tax. But in the new regime in GST, ATF has been plugged along with petroleum which is outside of GST. We have also asked for zero rating of international shipments.
Do you have anything on the bucket list?
Apart from more and better infrastructure, we need a single window clearance. Customs clearance is not only that, you also need to have NoCs from a lot of allied agencies. We are happy with the Air Cargo Policy. We had requested that express should be included as a separate segment. With this policy, any airport operator will now have to figure in the express industry as part of the overall plan.