The what and why of GST for lo­gis­tics

The Goods and Ser­vices Tax (GST) Bill, which is ex­pected to turn many things for the lo­gis­tics sec­tor, is al­most on its way to be­ing ap­proved. If im­ple­mented in a right way, it can def­i­nitely work in favour of the in­dus­try.

Cargo Talk - - Front Page - KALPANA LOHUMI

The Lok Sabha and the Ra­jya Sabha have ap­proved the GST bill which has the po­ten­tial to trans­form the coun­try’s do­mes­tic lo­gis­tics. It is ex­pected to be­come an of­fi­cial act by April 1, 2017 which will in­clude cen­tral ex­cise, ser­vice tax and var­i­ous local levies. This regime is slated to over­haul the present in­di­rect tax regime with the ob­jec­tive of ad­dress­ing many is­sues, be it mul­ti­ple ap­pli­ca­ble levies, sale of goods and pro­vi­sion of ser­vices com­plied with pay­ment, re­port­ing and au­dit re­quire­ments un­der dif­fer­ent tax au­thor­i­ties, to name a few.

GST will al­low com­pa­nies to op­er­ate one large cen­tral ware­house, rather than hav­ing mul­ti­ple ware­houses. To­day the dis­tri­bu­tion is di­rectly to re­tail ware­hous­ing but with GST there will be hub ware­hous­ing.

CARGOTALK finds the right time to dis­cuss with the in­dus­try ex­perts on how GST is go­ing to ben­e­fit the in­dus­try, and what clar­ity the in­dus­try needs from the govern­ment about the tax.

Ex­pe­dit­ing freight move­ment

Samir Shah, Chair­man, FFFAI The rev­o­lu­tion­ary tax structure would im­mensely im­pact the man­u­fac­tur­ing and lo­gis­tics in­dus­try, which have hith­erto been fac­ing se­ri­ous is­sues ow­ing to huge cost bur­den on them, pri­mar­ily be­cause of ex­or­bi­tant trans­ac­tion costs and mul­ti­ple taxes. GST, which has al­ready been im­ple­mented in many de­vel­oped and de­vel­op­ing coun­tries, is ex­pected to ac­cel­er­ate the speed of freight move­ment and growth of freight vol­ume within, from and to the coun­try sup­ported by a ro­bust ware­hous­ing sys­tem. The im­ple­men­ta­tion of GST would be at ap­pro­pri­ate time.

FFFAI, how­ever, is urg­ing the govern­ment and ‘GST Council’ (to be con­sti­tuted soon to shape up the de­tailed structure of GST) that all freight for­warders/cargo agents should be ex­empted from the ser­vice tax (later GST) regime to make ex­ports from India com­pet­i­tive. Un­like other coun­tries, freight for­warders in India have to pay ser­vice tax, which they re­cover from their cus­tomers (ex­porters).

Bor­der check-posts to be re­moved

Vi­jay Ku­mar, COO, Express In­dus­try Council of India

We are hope­ful that the govern­ment en­sure that all the bor­der check-posts be­tween states would be re­moved. The in­ter­na­tional im­port and ex­port ship­ments should be zero rated un­der GST regime. For In­ter­na­tional ship­ments to en­sure seam­less move­ments within the coun­try it is vi­tal that the cus­toms clearance sys­tem (ICEGATE) is linked to GSTN.

Avi­a­tion Tur­bine Fuel is cur­rently treated sep­a­rately from other petroleum prod­ucts for claim­ing mod vat cred­its and if ATF is not brought un­der the GST regime there would be sub­stan­tial cost im­pact on ATF used in our mem­ber air­crafts due to cas­cad­ing du­ties lead­ing to price rise. In or­der to lower com­pli­ance cost, net­work in­dus­tries like express in­dus­try, banks etc will only need to do sin­gle cen­tralised regis­tra­tion un­der the GST regime as is the case with ser­vice tax regis­tra­tion presently.

Trick­le­down ef­fect

Ajit Venkatara­man, Manag­ing Direc­tor, APM Ter­mi­nals India

The new tax regime will usher an era of con­sol­i­da­tion of lo­gis­tics hubs lead­ing to higher economies of scale. There promises to be a more prac­ti­cal ap­proach to lo­ca­tion and size of ware­houses closer to man­u­fac­tur­ing cen­ters and con­sumer mar­kets. Larger ve­hi­cles with less check points will re­duce tran­sit times, im­prove as­set util­i­sa­tion and make goods more af­ford­able for the con­sumer.

Al­though the fine print is yet to be fi­nalised, we are pos­i­tive that the im­pact of GST will have a trick­le­down ef­fect on the en­tire sup­ply chain mak­ing it more stream­lined. Im­ple­men­ta­tion of GST has to go hand in hand with the rel­e­vant in­fra­struc­ture setup, whether civil or IT and or­gan­i­sa­tions need to stream­line their pro­cesses to fit into the new tax frame­work. In or­der to as­sist in­dus­try play­ers to de­velop and successfully im­ple­ment re­vamped sup­ply chains, the govern­ment needs to sup­port de­vel­op­ment of es­sen­tial in­fra­struc­ture for hub and spoke mod­els. This would help ease the con­cerns around un­fore­seen chal­lenges GST may bring.

Ma­ture mind­set

Arnaud Cauchy, Manag­ing Direc­tor, GEFCO India

Tax ter­ror­ism will come to an end with the im­ple­men­ta­tion of GST. The good thing is en­try tax will be in­cor­po­rated and we do not have to pay en­try tax, this will re­duce our wait­ing time at the bor­der and in­crease our ef­fi­ciency by re­duc­ing the de­liv­ery time. On com­mer­cial as­pect, we will be able to pro­vide with some in­no­va­tive so­lu­tion to our prime cus­tomers. So­lu­tions like op­ti­mised trans­port plan with pri­mary trans­porta­tion from plant to re­gional hub, multi brand stor­age at re­gional dis­tri­bu­tion com­pound with multi ser­vices such as PDI and PPO and fi­nal sec­ondary trans­porta­tion to our deal­ers can be pro­vided. For India, there is a need for a more ma­ture mind set of the lo­gis­tics in­dus­try in the sup­ply chain mar­ket. Sec­ondly, it def­i­nitely needs to ac­cel­er­ate the im­ple­men­ta­tion of the GST bill which in turn will favour the global lo­gis­tics de­vel­op­ment and pre­pare India to be the lo­gis­tics hub of the world.

In terms of clar­ity on GST, firstly in trans­porta­tion in­dus­try ser­vice tax is ap­pli­ca­ble. On a typ­i­cal sce­nario, ei­ther con­signs or con­signee is li­able to pay tax and in some cases trans­porter is li­able to pay tax. We need to have clar­ity on the fact that with the im­ple­men­ta­tion of the GST, who will be li­able to pay tax ei­ther con­signor or con­signee or trans­porter, also whether there will be any abate­ment from the ex­ist­ing rate. Sec­ondly, GST rate is also not fi­nalised as of now and with the cur­rent dis­cus­sion go­ing on it seems that rate will likely be around 18 per cent. Thirdly, we need to ask our­selves what will be the im­pact of cap­tive con­sump­tion of ser­vices for the com­pa­nies which do in-house main­te­nance of ve­hi­cles.

Lower in­ven­tory and re­duced doc­u­men­ta­tion

Prakash Tul­siani, Ex­ec­u­tive Direc­tor & COO, All­cargo Lo­gis­tics

This Bill is set to rev­o­lu­tionise lo­gis­tics with uni­fied and sim­pli­fied structure ver­sus mul­ti­ple taxes at var­i­ous lev­els. It will lower the in­ven­to­ries and work­ing cap­i­tal; re­duce doc­u­men­ta­tion, im­prove

Arnaud Cauchy Manag­ing Direc­tor GEFCO India

Samir Shah Chair­man FFFAI

Prakash Tul­siani Ex­ec­u­tive Direc­tor & Chief Oper­at­ing Of­fi­cer All­cargo Lo­gis­tics

Ajit Venkatara­man Manag­ing Direc­tor APM Ter­mi­nals India

Vi­jay Ku­mar COO Express In­dus­try Council of India

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