GST India: Impact on Logistics sector

With GST, India would become a uniform, common market for Goods and services, breaking state barriers and borders. This would lead to re-engineering of warehouse strategy by various manufacturers and principal companies. Decisions on location of warehouses will no longer be driven by tax considerations (CST) as in the GST regime, interstate transactions would be on par with intrastate transactions on the front of applicable taxes. Warehousing decisions will henceforth be driven by considerations like location of major customer / market and optimization of goods movement. Since any supply would be taxed, branch transfers would get discouraged leading to optimization of transport. Elimination of statutory forms (C-Form, F-Form, E1-E2 etc.) would reduce the requirement for scrutiny at state borders.

13% of GDP is spent on logistics in India, vis-à-vis developed countries where the corresponding figure is 9%. 65% of logistics in India moves by road and time spent at interstate check posts due to difference in taxes between states accounts to idle time (60% of total journey time) which will get eliminated in GST regime. Hence, transport time would reduce by 30-40% and transport costs by 20-30% leading to fall in prices by 3-4%.

However, since petroleum products are kept outside the scope of GST currently, and since nearly 50% of all goods transported is motor spirit, some of the benefits of GST may not reach end customer. Also, the reverse charge mechanism applicable to GTA (Goods Transport Agencies) would continue under GST. 

(Views expressed are strictly personal)