May 24 2017 0Comment

The Gist of GST

The Gist of GST for the Materials Handling & Logistics industry.

Marked as the biggest tax reform that our country has seen post-independence the Goods and Service Tax is sure to have a huge impact on our economic environment. An indirect form of tax it is applicable to businesses, service providers, professionals and freelancers.

Every item falls into one of the five baskets – the zero per cent basket, the 5 per cent basket, the 12 per cent basket, the 18 per cent basket and the 28 per cent basket. Depending on which of these baskets it is classified in, a commodity it can be more expensive or cheaper. Additionally, there is a SIN basket, with an additional cess.
Like all the various industries GST is bound to impact the supply chain of a business. Implementation of GST will make the logistics and transportation sector more efficient Today, taxes are levied by both the Central and State government. And, any business must maintain all the accounts as per the applicable laws which become a complex structure when it involves different places and states. It will remove this complexity of individual state taxation system. Also, checking of sales tax during interstate transportation will not be needed anymore. Checks at state borders slow movement of trucks causing a lot of fuel wastage. With this change, both transport & manufacturing companies will be able to take better advantage of the economies of scale.

Elimination of multiple state taxes will encourage logistics companies to consolidate warehouses instead of maintaining one in each state to avoid Central Service Tax. There will be more focus on setting up warehouses in the manufacturing hubs leading to reduced cost of transportation, labour and real estate.

Having a uniform tax code, breaking state barriers and borders will make life simpler for all the stakeholders in the system with lesser paperwork to deal with. This, in turn, leads to speed efficiency – as goods will be transported faster, with far lesser checkpoints.GST is the change that the logistics industry awaits as it’s positive impact far outweighs the disadvantages.

Even though most of the Material Handling & Equipment fall under the highest tax slab of 28%, GST is the change that the logistics industry awaits as it’s positive impact far outweighs the disadvantages.

What is your take on the GST? Do you feel its a step in the right direction?