GST and the logistics sector

Why is it in the news?
  • As per a recent survey, the Indian logistics sector provides livelihood to 22 million-plus people, which is expected to be over 40 million by 2020.
  • The high rate of growth in the next couple of years is expected largely due to implementation of GST.
  • India has moved from the 54th position in 2014 to 44th in 2018 in the World Bank’s Logistics Performance Index.
More in the news
  • GST has replaced at least 7 indirect tax heads and has eliminated the need for warehouse hubs across States.
  • Further, GST has eliminated check posts across the nation and thereby waiting time, leading to at least 12-15% reduction in the turnaround time of trucks.
  • Considering the double-digit growth, the logistics market would exceed $250 billion in the next two years.
  • Better utilisation of assets like vehicles and warehouses will lead to efficiency and increased productivity thus lowering overall cost.
  • This would considerably benefit the supply chain directly and India’s growth indirectly.
  • Post GST, there is a marked improvement in the use of technology and digitization by logistics players.
Logistics costs
  • Logistics costs have been one of the biggest stumbling blocks for Indian manufacturers eyeing exports.
  • At about 13-14% of GDP, India’s logistics cost is high, and compares with about 8% in advanced nations.
  • This despite the percentage of outsourcing being higher in developed markets.
  • The Centre has made clear its intention to bring down this cost to less than 10%, which would make Indian manufacturers globally relevant.
Infrastructure Status
  • The infrastructure status to the sector was conferred in November 2017.
  • Infra status is helping the sector avail cheaper finance (2% lower) for its warehousing and cold storage needs.
  • This will bring in a lot more players with an integrated service approach that would again help Indian manufacturers.
  • New investments in this sector is good news as it could create a lot more jobs in the near future.
Source
The Hindu.


Posted by Jawwad Kazi on 19th Nov 2018
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