Logistics sector, which accounts for nearly 14 per cent of the GDP, could see savings to the tune of USD 200 billion annually on implementation of GST, which will ensure faster movement of goods and less idle hours, say experts.
With the introduction of Goods and Services Tax, many taxation procedures will come down, nearly halving the cost of inventory as customers will not need to pile up stocks in different warehouses, say experts.
“For a USD 2-3 trillion dollar economy, this could mean a potential of USD 200 billion wasteful inventory spent being available to deploy in productive value creation and further propelling the economy’s growth,” said Deepak Garg, founder of logistics firm Rivigo.
Describing the passage of the GST bill in Rajya Sabha as a “positive reform”, apex transporters body All India Motor Transport Congress (AIMTC), which represents 80 lakh truckers, said the new regime would create efficient ecosystem and bring down the cost.
“The new regime must usher in border-less, barrier-less, seamless movement of goods and passenger so that efficiency is engendered in road transport ecosystem and transportation and logistics cost is brought down to internationally competitive level,” said AIMTC former president Bal Malkit Singh.
According to a transport sector expert, delays at toll plazas and extra fuel consumption result in annual loss of over Rs 1 lakh crore.
IIM-Calcutta in a study earlier estimated an annual loss of Rs 87,000 crore because of delays and extra fuel consumption at toll plazas.
According to Singh, while trucks in the US cover a distance of 800 km in a day, in India it is barely 280 km.
The government intends to roll out the GST, which will subsume central excise, services tax and various local levies from April 1, 2017. Implementation of GST will enable creation of a common market, thereby allowing free movement of goods and services across the country.
Simpler documentation, Garg said, will allow faster movement of cargo, less stoppages and minimal damages.
Moreover, he added, the GST will allow companies to operate one large central warehouse, rather than having multiple warehouses.
GST will also give a boost to organised service providers leading to greater efficiencies, better use of technology and cost advantages, he said, adding these could result in savings to the tune of 30 to 50 per cent.
According to Garg, “GST reform, along with innovation in logistics sector can be a game changer for Indian economy. It will be a constitutive shift which will propel our economic growth and benefit not only businesses, but also the Indian society in entirety.”