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Goods and Services Tax (GST) to remove bottlenecks in India's logistics industry?

May 18, 2017

The current scenario of the logistics industry in India is far from ideal. Today, Central and state governments levy different taxes separately. A Ministry of Road Transport and Highways report says that a typical truck spends 16% time at check-posts. On an average, a truck in India runs an annual distance of 85,000 km compared to 150,000 to 200,000 km in the Western countries.

The industry is fragmented due to the state-level tax structures, which forces enterprises to put up warehouses in every state. This makes the supply chain longer than necessary and to a certain extent inefficient. Additionally, due to the complex tax structure, the transport industry spends 50–60 percent of resources on tax compliance and deposit of interstate sales tax.

GST implementation aims to remove complex web of tax structure

The Goods and Services Tax (GST) will be implemented this year. The new law is expected to help the overall growth of economy and a softening in prices and may even translate into a 2% GDP growth, according to experts. Besides making taxation simpler, the GST will impact all industries, of which the most remarkable effect is expected to be on transport and highways.

India’s logistics industry is worth over $130 billion and is critical to the country’s plans to mature into an economic superpower. However, it wouldn’t be possible unless a more efficient logistics industry is in place. The GST is expected to remove bottlenecks in the full-fledged development of logistics infrastructure and lead to smoother transport system. The GST would replace the obsolete and inefficient transport system of yore that was built around the state taxation system.

GST impact: GST rollout will clear India’s highways

Logistics should ideally make commercial activities efficient, but it is caught in the web of complex rules and regulations. There is a lot of paper work involved that impedes the flow of goods. Transporters are required to have in their possession hard copies of invoice as well as various forms. With all that complex documentation gone, India’s logistics industry will critically help its plans to mature into an economic superpower.

This article was first published on LinkedIn by Muqbil Ahmar

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