GST remains a distant dream
There has been no mention of GST in the Union Budget 2016-17. But the industry still has hopes for long term benefits. Some experts share their views on how a better tax regime could have been a game changer.
Not a single mention of the goods and services tax (GST) in the Union Budget 2016-17 has left many with a mixed bag of emotions. Experts says that GST presents an opportunity to rationalise and re-engineer transportation and logistics networks, given the inefficiencies with taxes based on the crossing of administrative boundaries or border checkpoints.
The prevailing complicated tax structure in India means that logistics decisions, including the choice of setting up inventory and distribution centres, are taken based on the tax regime such as central sales tax and state valueadded tax (VAT) rates, rather than on operational efficiency.
GST has the potential to unleash a new era of developing logistics infrastructure and take investments to the next level. From the infrastructure point of new, this tax structure would reduce the number of warehouses but increase their sizes. Truck delays due to roadblocks, toll and other stoppages which add to the logistics can be reduced by this new tax structure. Secondly, the ‘ Make in India’ initiative also needs the much- awaited tax to enable the country to become a manufacturing hub. It is necessary that the foreign investors find it encouraging to do business here and indirect and complicated tax regime possibly will become the impediment to a smooth business. GST would also reduce the cost of manufacturing both from a tax perspective as well as on compliance front. Some experts express their views. Exceprts:
Arnaud Cauchy, Managing Director, Gefco India
“It has been a long wait but we have faith in the system and hope it takes a positive turn. It is definitely going to benefit the logistics industry as a whole and especially the shipping industry by bringing down the product prices.
The implementation of GST will promote the development of logistics parks, and free-trade warehousing zones will speed up formation of regional hub-based was expected to increase GDP by 1 per cent.
If not implemented, there may be financial losses due to investment made and underutilisation of resources.
Deferment of GST will drastically impact the several initiatives taken by the government for the growth of the economy, efforts of making the logistics sector seamless in the country and on ease of doing business.
GST has the potential to reshape the taxation in India and bring more clarity and transparency into the system.
Also, anticipated may shrink.”
Vineet Director, TCI
“GST is the most critical tax reform that India has been longing for. The investments in infrastructure and technology by the logistics players will be absorbed by market demands in coming time. The benefits of GST are immense in terms of reducing economic distortions, creating a nationwide single tax market, widening of tax
Managing Employment numbers, hoping for a successful ‘Make in India’ initiative, will also be hit badly.”
Shantanu Bhadkamkar, Managing Director, ATC (Clearing and Shipping)
“It is most unlikely that GST in its true form will be rolled out. GST coupled with ‘ Make in India’ would have given a big impetus to the manufacturing sector in particular and economy in general.
Logistics industry, particularly the organised logistics industry, greatly depends on the manufacturing sector for growth. Investments in logistics sector need to be done far ahead of the actual requirement and it needs to be factor while investing, unless the investors have speculated on any particular location. They will anyhow benefit by growth in the manufacturing sector.
GST in original form that is single window, single law, single declaration, single return, to name a few was expected to increase GDP by 1 per cent (which translates in to acceleration of growth rate by about 15 per cent) on count GST alone. This would have contributed hugely to improvement in ‘Ease of Doing Business Index’, and improvement in ranking of ‘Ease of Doing Business Index’ would result
Deferment of GST will impact several government initiatives for economic growth and efforts to make logistics seamless With a deferment, the opportunity for reduction of logistics transaction costs in India will be lost and this could prove costly