{"id":35764,"date":"2018-11-01T11:41:47","date_gmt":"2018-11-01T06:11:47","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=35764"},"modified":"2018-11-01T11:41:47","modified_gmt":"2018-11-01T06:11:47","slug":"gst-impact-on-the-logistics-sector","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/gst-impact-on-the-logistics-sector\/","title":{"rendered":"GST impact on the logistics sector:\u00a0"},"content":{"rendered":"<p><a href=\"http:\/\/www.livemint.com\/Opinion\/NbSCQ2KGNEcTGf1PA7IxcM\/GST-impact-on-the-logistics-sector.html\"><span style=\"font-weight: 400;\">GST impact on the logistics sector<\/span><\/a><span style=\"font-weight: 400;\">:\u00a0<\/span><\/p>\n<p><b>Context:<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Goods and services tax (GST), could affect profitability of the logistics sector in the short run, but operational efficiency is bound to improve in the long run<\/span><\/p>\n<p><b>Introduction:<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"> \u00a0The logistics sector attracts GST rate of 18%, up from 15% in the previous tax regime.<\/span><\/li>\n<\/ul>\n<p><b>Logistic sector components:<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"> \u00a0The logistics sector comprises the road transport sector (consisting of unorganized small businesses, trucking, fleets and large transport companies), the storage and warehousing sector and third-party logistics (3PL).<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> \u00a0These can be further classified into big and small players and asset heavy\/light companies.<\/span><\/li>\n<\/ul>\n<p><b>Key performance measures:<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"> \u00a0Profit after tax (PAT) as percentage of income and profit before interest, taxes, depreciation and amortization (PBITDA) as percentage of income.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> \u00a0\u00a0Between 2010 and 2015, PAT has declined for all sub sectors and shows volatility for the logistics and the storage sector.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> \u00a0\u00a0\u00a0\u00a0PBITDA is an important measure that reflects operating efficiency and ranges between a low of 7% for the road transport sector to a high of approximately 20% for the storage sector. <\/span><\/li>\n<\/ul>\n<p><b>What ails logistics?<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"> \u00a0Operational efficiency could have been falling for a variety of reasons, heavily affecting overall transportation costs as the logistics sector has been traditionally beset with several problems.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">This includes complicated networks, increasing coordination costs across the supply chain coupled with deficient infrastructure, entry taxes and poor vehicle-load-carrying capacities, resulting in delays and damages.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">The myriad number of taxes had made logistics a cumbersome and costly process.<\/span><\/li>\n<\/ul>\n<p><b>Way ahead:<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"> For manufacturers, the goods and services tax (GST) has now replaced the multiple state VATs and the need to have a hub across all states will cease to exist.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> This will allow firms to redesign supply chains and centralize hub operations to take advantage of scale economies.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> It will also allow firms to employ efficient practices such as bulk-breaking and cross-docking from a central location.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> \u00a0Already, Nagpur, India\u2019s \u201czero mile city\u201d, is looking to become the \u201cnation\u2019s warehouse\u201d and is witnessing increased investment from retailers and warehouse companies betting on GST transforming the nation\u2019s logistics space.<\/span><\/li>\n<\/ul>\n<p><b>GST and its impacts:<\/b><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\"> \u00a0Under GST, the tax on warehouse, storage and other labour services has increased from 15% to 18%.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> \u00a0\u00a0\u00a0So a third-party logistics provider will now have more incentive to move towards the provision of services that have a high degree of value addition and where input tax credit can be claimed.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> \u00a0This can result in consolidation in the storage and warehouse sector.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> \u00a0\u00a0GST will bring a lot of alignment of value-added services in the logistics sector .<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> This will make way for cutting-edge investments and mergers and one will see a phenomenal increase in asset utilization and increase in operational efficiency<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> \u00a0\u00a0There will be new investment opportunities for technology-enabled mini warehouses along the highways and the sector will witness a fresh wave of technology enabled start-ups.<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> While GST won\u2019t solve many intrinsic problems of India\u2019s transport network, it could reduce the logistics costs of companies producing non-bulk goods by as much as 20%, according to an estimate by Crisil Ltd<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The impact and overall cost benefits of GST will additionally vary widely across industries.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>GST impact on the logistics sector:\u00a0 Context: Goods and services tax (GST), could affect profitability of the logistics sector in the short run, but operational efficiency is bound to improve in the long run Introduction: \u00a0The logistics sector attracts GST rate of 18%, up from 15% in the previous tax regime. Logistic sector components: \u00a0The&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/gst-impact-on-the-logistics-sector\/\">Continue reading <span class=\"screen-reader-text\">GST impact on the logistics sector:\u00a0<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-35764","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/35764","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=35764"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/35764\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=35764"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=35764"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=35764"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}