7/13/2016 GST to boost logistics sector Business News

http://www.businesstoday.in/current/economypolitics/gsttoboostlogisticssector/story/234898.html 1/8

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Sumant Banerji        Last Updated: July 12, 2016  | 00:00 IST

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7/13/2016 GST to boost logistics sector Business News

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A unified goods and services tax (GST) will bring down logisticscosts in the country by up to 20 per cent enabling the sector togrow at a CAGR of 1520 per cent till 2020/21, according to astudy by Care Ratings.    

The logistics industry is primarily categorized into foursegments  transportation, warehousing, freight forwardingand valueadded logistics. The sector has been beset withproblems ranging from a bulbous and complex tax structure,inefficient customs clearance processes and procedures to poorback end infrastructure. Multiplicity of taxation across the 29

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7/13/2016 GST to boost logistics sector Business News

http://www.businesstoday.in/current/economypolitics/gsttoboostlogisticssector/story/234898.html 3/8

states means freight moves slowly and is taxed multiple timesin the country. Transportation alone accounts for 60 per cent ofoverall logistics cost in India.

"Currently, third party logistic service providers (3PLs) havewarehouses located near major distribution centres of its keyclients (industries) irrespective of its geographic disadvantagemainly to avoid interstate taxes. However, post GSTimplementation 3PLs are expected to build integratedwarehouses at logistic suitable locations," says Anila Gode,Deputy Manager at Care Ratings.

The biggest beneficiary of lower logistics cost would be theconsumer durables sector where warehouses are built indifferent states to avoid interstate tax. Currently there are 2030 warehouses in the country per company and additional 2030 carry and forwarding agents that makes the supply chainlonger and inefficient. According to CRISIL Research's

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7/13/2016 GST to boost logistics sector Business News

http://www.businesstoday.in/current/economypolitics/gsttoboostlogisticssector/story/234898.html 4/8

assessment, potential saving for the sector could be in therange of 30 per cent of logistics costs from current levels of 78per cent of sales. "It shall make logistics firms more efficientbesides reducing their actual requirement for commercialvehicles and will help in lowering product prices byapproximately 10 per cent," says Vineet Agarwal, ManagingDirector, Transport Corporation of India.  

The proposed GST that was passed in the lower house of theparliament in May 2005  it has been held up in the upperhouse ever since  is a consumption based tax. It subsumesmultiple taxes levied by both the Centre (excise duty,countervailing duty and service tax) and state (valueadded tax,octroi and entry tax, luxury tax, etc.).

It means same level of taxation on a specific product or serviceacross the entire country irrespective of being manufacturedand sold in different states. The planned dual GST model(central GST and state GST) proposes to replace around 29state and federal taxes and tariffs for a single tax at the point ofsale. The current combined Centre and state statutory rate formost goods works out to 26.5 per cent (Cenvat of 14 per centand VAT of 12.5 per cent), whereas post GST implementation itis expected to reduce to standard rate of about 1821 per cent.

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7/13/2016 GST to boost logistics sector Business News

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7/13/2016 GST to boost logistics sector Business News

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