How GST (Goods and Services Tax) Has Affected Logistics in India!

Goods and Services Tax

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Right after demonetization, another big thing that came to India was the implementation of GST (Goods and Services Tax).

The sudden rise of the goods and service tax, despite getting a negative impression from some, actually reformed the Indian economy in a much better way.

Over time it was understood that this was much needed and it actually helped in organizing and setting up different logistics and transport sectors to speed up their overall processes.

From the movement of trucks to managing a good economic supply chain, GST affected logistics in a great way.

Various case studies were carried out and it was seen that there was a 20% reduction in turnaround trucks after dismantling at the border checkpoint. Implementation of the Goods and Services tax also benefitted e-bills.

The logistics sector in India is worth $130 million and the number is gradually increasing with a passing day. Logistics is one of the major sectors contributing a significant amount to the Indian economy and it is also a catalyst to speed up India’s manufacturing and e-commerce dreams. 

Growth and Evolution

The logistics sector has evolved over time and the implementation of different, innovative ideas have not been in vain. Starting out as just first party logistics, the sector grew in baby steps towards a value as large as $130 million.

Right after first party logistics, came second and third party logistics. They started providing a complete package with all kinds of services and made international dealings possible. From including transportation, warehousing, pool distribution, packaging solutions, inventory management, management consulting, logistics optimization and last-mile delivery the logistics sector complemented advanced supply chain facilities.

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Every day over seven million vehicles are moving all across the country to deliver products to people’s houses. The statistics have shown an increase in freight shipping volume to about 1325 billion and these numbers are predicted to double by 2025.

Some of the major GST effects on the present and future are listed below:

Helped logistics and e-commerce achieve their potential

The integration of the multilayer goods and service tax turned the Indian tax system into a unified one and eased the way of conducting business.

The process reduced the overall transportation tax and helped in enhancing various logistics decisions. This not only helped logistics move forward but also helped the logistics industry reach its potential in terms of matching high-quality service levels and growth. 

Reduced Transit Time

Being one of the most preferred modes for transportation over-the-road delivery has experienced a reduced transit time.

The regulatory impediments and in transit delays have greatly reduced and other organizational dysfunctions have also significantly reduced. There used to be a lot of hassles which decreased the efficiency of the logistics. The implementation of a unified GST market has provided an increased efficiency.

iThink Logistics said, that GST has helped them to ease out their virtual calling function and reduce their overall expenses. Since 2017, there has been smoother flow and functioning has become more seamless than before. The company says that GST has enabled logistics companies to deliver goods more efficiently, optimize delivery timelines and improve capacity utilization.

Significant reduction in paperwork

With the evolution of this unified tax structure there has been a significant reduction in the paperwork and consolidation. Earlier a lot of trucks were stopped at borders due to different and pending paperwork. Now with a single document available, it has become easier for logistics carriers to carry out deliveries much faster.

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There has also been a consolidation of small stock transfer warehouses that lead to a reduction of overall warehouse maintenance cost. It also increased GDP and entailed new compliance that was much needed for the e-commerce and logistics sector. It also helped different companies use available tax credits for buying vehicles and materials.

Eased out synchronization between buyer and seller

With the implementation of the Goods and Service tax the logistics industry started exploring new innovations for their supply chain models and helped in building a better customer-seller relationship. 

In the past few years, the perks have been great and we hope that it keeps on benefitting the sector in the same way in the years to come. But the longevity and the consistency can be only understood over the passage of time.

Article written for iThinkLogistics by Madhurima Sen.

Goods and services tax article, and permission to publish here, provided by Sunita Singh at https://www.ithinklogistics.com/. Originally published on Supply Chain Game Changer on February 28, 2019.

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