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The Goods and Services Tax (GST) overhauled the indirect taxation regime in India. Hailed as the biggest tax reform since independence, GST was implemented in India after decades of discussion in July 2017. A landmark reorganization, the new taxation system under GST brought substantial benefits to the logistics industry. Significantly, this coincided with the expansion of e-commerce in India, which also had a huge impact on the logistics sector and resulted in a significant increase in demand for logistics services in India.
Let us now look at the benefits accrued by the industry post the implementation of GST.
Eliminated confusion and complexity
Earlier, logistics companies were beset with confusion owing to different taxes charged in different states, entry tax, VAT, Octroi, CSR etc. This lead to increased costs and logistical challenges. But now they have been subsumed under one tax, that is, GST, which has ensured a smooth supply of goods. GST has reduced the number of tax systems that businesses deal with, making it simpler for them to comprehend and follow tax laws. This has also aided in lowering corruption and tax avoidance.
Simplified tax procedure
Not just logistics, but one of the key benefits of GST across industries is the simplification of tax procedures. It has replaced multiple taxes with a single tax, thereby reducing the burden of compliance for logistics companies. As a result, it takes less time and money to transport goods across state borders, leading to faster delivery and increased efficiency in the supply chain.
Elimination of entry tax
Entry tax is charged by states when transport vehicle carrying goods enter their borders. GST has eliminated the need for warehousing and distribution centers in each state, leading to cost savings for logistics companies. Earlier this was done to save tax, but with a simplified nationwide taxation system, this cumbersome process is out of the way.
Input credit system
With the implementation of GST, companies can now claim tax credit for the taxes paid on inputs such as raw materials, equipment, and services. This has reduced the overall tax burden on logistics companies, leading to a reduction in the cost of goods transported, thus, making logistics more affordable for businesses. Logistics companies can pass on these savings to their customers, making their services more competitive and affordable.
Reduction in paperwork
Post-implementation Goods and Services Tax, logistics company have to deal with lot less paperwork compared to before, as the e-way bills under GST has also enabled a trouble-free supply of goods. It is the only document which is required with transport vehicles, making documentation lot less complicated.
No state-level check posts
Thanks to GST, there are no longer any state-level check points where vehicles can be stopped and inspected, hence, the process of transporting goods across state borders has become more streamlined and cargo is delivered more quickly. Therefore, businesses that depend on prompt transportation of goods have benefited from the decrease in transit times and speedier delivery of goods as a result.
In conclusion, the new tax regime has worked largely in favour of the logistics industry. Reduced compliance requirements at the inter-state check posts has minimized transportation time; advent of e-way bill and digitization of the entire system has reduced the burden of paperwork; simplified tax procedure without having to worry about different states having different tax rates, and the facility of input tax credit system has reduced costs, making logistics more efficient. The new taxation policy has incentivised investment in the sector, and will continue to spur growth in the industry in coming years.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Indian Transport & Logistics News.