Effect Of GST On The Logistics Sector

GST is a welcome move for the logistics sector.

- Prof. G Raghuram

Goods and Services Tax (GST) would have come into play by the time this magazine hits the stands. For the logistics sector, it is a welcome move. Replacing taxes levied by the central and state governments, GST will impact the logistics sector on at least two counts. First, with the central sales tax regime giving way to GST, inter-state barriers for domestic trade will go away. This will reduce the transit time. Warehouse locations for various principals could be rationalised such that they can consider secondary distribution from larger and fewer warehouses into territory governed by logistical considerations rather than administrative considerations like state boundaries. Second, with uniform taxation for a product across the country, sourcing distortion and sales in ‘tax haven’ states at the cost of logistical optimisation will reduce. The effectiveness of both will depend on the robustness and population of the IT-based GST Network (GSTN), which would allow for online reconciliations.