Warehousing and Logistics Industry Getting Significant Boost Because of GST Implementation

The implementation of the Goods and Services Tax (GST) in the country has proven to be a boon for the warehousing and logistics industry and has resulted in providing the much required fillip to it. As the road-bumps in the all-comprehensive GST regime are being removed, there are likely to be greater thrust to the industry which is poised to grow to $200 billion by 2020. As the logistics sector in the country gets stronger, there will be direct impact of GST on real estate’s commercial segment, which will benefit with the setting up of logistics parks and warehouses.

Unification Of Taxes

The Goods and Services Tax (GST) has done away with multiple taxes like VAT, Octroi, Excise Tax, etc. GST has made India a singular big market which will result in construction of larger warehouses. GST is also resulting in popularity of larger trucks on the roads and creation of hub-and-spoke model for various aspects of the logistics industry like warehousing, container freight stations and inland container depots, thus improving the prospects of commercial real estate in various parts of the country.

Economies Of Scale

GST is also bringing in economies scale of to logistics companies owing to lot of savings and lower delays. The single biggest advantage of the new tax system in the country is in the form of reduction of lengthy clearance process and redundant paperwork at various inter-state points for the trucks and carriers of goods. This has brought down delays at inter-sate points which has resulted in savings of 30-35 percent in costs for the transporters. Abolishment of entry taxes at borders of states and easier movement of goods has resulted in significant ease of doing business for the transporters.

Various check points in about 20 states have been removed since the introduction of GST. The introduction of E-Way Bills for consignments of Rs 50,000 or more is preventing undue harassment of truckers.

Bigger Warehouses Coming Up

Transport companies have started to look for bigger land parcels for setting up larger warehouses. The bigger warehouses will result in additional cost savings for the logistics providers. With cost savings, the transporters are able to provide services at lower costs to companies which will result in more and more companies to outsource the logistics part of the business to third party and fourth party service providers.

A robust and efficient logistics sector can boost the GDP by over 100-200 basis points and open up a number of commercial and other opportunities in the country, according to experts.

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