The logistics sector saw a few expected results and some unexpected surprises in the implementation of the GST regime. While firms started reducing the number of warehouses and trucks were covering more distances, in some cases there was confusion and cash crunch owing to lack of clarity and delayed tax credits.
Companies have started having lesser and bigger warehouses, although this is not true for all sectors. “Large engineering and manufacturing firms that have buffer of 1-2 days’ lead time for their deliveries are seeing the most benefit. However, for companies that have faster delivery requirements from their customers/retail stores, like mobile phone companies, the number of warehouses has not decreased as much,” Samir Lambay, Co-Founder & CEO, FreightCrate Technologies Pvt Ltd, an eight-month old start-up in the space of online freight rate and logistics management solutions told.
E-commerce firms’ logistics strategy is creating rural employment. “Due to the relaxation in levies under GST, various warehouses are opened in multiple locations now and this helps in providing rural-employment. This helped in improving the standard of living for a few,” said Archit Gupta, Founder and CEO, ClearTax. “All customers can set-off the GST on warehouse services against the GST on their product sales unlike during service tax regime when VAT from product sales could not be set-off against tax on warehousing services,” added Lambay.
The impact on freight charges due to GST are not clear. “Some factors like input tax credit on rail, faster truck movement on roads pushed the charges down. But lack of input tax credit on fuel usage pushed the prices up,” points out Gupta.
Moving to a simpler tax regime involved complexities. “Cost of installing new applications needed to comply with the GST initially was an add-on expense for many small and medium players in the logistic sector,” said Gupta.
“The delay in acceptance of e-way bill provisions by various States had brought about confusion and commotion among transporters due to the absence of clarity. Though the Centre kept issuing clarifications from time to time, the unrest among the transporters remained,” added Gupta.
Pirozshaw Sarkari, CEO, Mahindra Logistics, said, “GST led to consolidation of multiple taxes, simplifying processes. Its implementation is taking time for customers and logistics companies as they get accustomed to the changed systems and the benefits it can offer. Initially, it impacted the inflow of new orders and cash flows, as customers grappled with the change. Slowly, things are coming back on track.”