IMPACT OF GST ON LOGISTICS

Logistics Industry is one of the major drivers of Indian Economy. It contributes about 7% to India’s GDP. GST tax subsumes multiple indirect direct taxes into one single tax.

Impact of GST

The impact of GST on logistics industry can be broadly divided into 3 categories:

Due to change in the tax structure The services tax on transportation was 15%. However, Under GST, Tax has been increased to 18%. This change will slightly increase the cost.

Seamless movement of good across state borders At present around 60% of the total transit time is idle time. Idle time is mainly on account of stoppages at state borders where relevant papers are checked and taxes are as paid as per goods being carried. With GST, It is expected that the idle time would be reduced by 20% to 30% and shipment cost by 30% to 40%.

Increased Operational efficiency

  • Under single tax regime most of the warehousing and transportation related decisions would be taken considering operational efficiency rather than tax considerations. Moreover, there would be a spur in logistics businesses. More and more firms who don’t have logistics as their core competency would outsource it to a more competent logistics player to take benefit of the cost.
  • Logistics providers would have to consolidate warehouses, operate on Hub and Spoke model, and redesign transportation routes to bring down the cost by achieving economies of scale.
  • Uninterrupted flow of goods will bring down the uncertainty in the transportation lead time. This will bring down the safety stock required and ultimately the inventory required would also go down. This will further bring down the supply chain cost.

The above impacts (a) and (b) will be common all across the logistics firms. It the operational efficiency for which firms would have to relook at their current business structure. CronJ can provide customized solution that can help you to realize the complete benefits of GST.

What CRONJ can offer:

  • 1

    An Integrated IT system that can help you synchronize movement of physical goods, information and financial information

  • 2

    Complete Supply Chain network remodeling and optimization to suite your current business

  • 3

    Route and Load planning system to increase operational efficiency

We are confident that our system will enhance your productivity and will enable you to bring down your input cost that will make you more efficient and cost competitive.