Logistics sector, which accounts for nearly 14 per cent of the GDP, could see savings to the tune of USD 200 billion annually on implementation of GST, which will ensure faster movement of goods and less idle hours, say experts.
With the introduction of Goods and Services Tax, many taxation procedures will come down, nearly halving the cost of inventory as customers will not need to pile up stocks in different warehouses, say experts.
eTailing India Thought Corner
GST and its effect on Logistics in India
Road transportation of goods could increase as the new tax mandate soothes prevailing complexities. Inter-state logistics program will get cheaper by up to 20%. E-commerce players can focus on building a seamless supply chain and logistics network across the country. Due to smoother norms, the process of supply chain will be faster and time efficient.
However there are some key issues that need to be addressed in the rule book. According to a report by PricewaterhouseCoopers (PWC), areas such as Place of Supply provisions, trade barriers during check-post inspections, entry permits, etc. and taxability of e-commerce transactions should be stressed upon for more clarity.
Let’s find out the key issues from the report.
1) Input Tax Credit
Input Tax Credit only of those capital goods falling within specified Chapters to the Model GST Law will be allowed. Further, the definition of inputs and input services also provides for exclusions. Therefore, it appears that even under GST, restrictions on Input Tax Credit will continue. Further, a nexus of goods and services received is also required to be established with outward supplies. Given this, the industry needs to represent for a broad-based credit mechanism.
- Reconciliation of inward and outward supplies
In case there is a mismatch between the details of outward supplies uploaded on the GST Network by the vendors and the inward supplies uploaded by the recipient, the said mismatch would be communicated to the recipient. If the mismatch is not rectified by the vendor in the month of communication, the recipient will be liable to pay the differential GST along with interest in the subsequent month. This provision places the liability for non-compliance on the recipient as against their vendors.
2) Bundled vs. unbundled
The concept of bundled services has been defined under the present Indirect Tax regime. Similarly, the Model GST Law defines composite supplies. However this definition has not been incorporated in the provisions determining taxability or valuation. Therefore, presently, the taxation of bundled services is not clear.
3) Need clarity on abatements
The Model GST Law does not presently provide for abatements. Given that petroleum products are outside the purview of GST, the same will constitute a significant cost, specifically to transportation services. Therefore, abatements should continue for transportation services of rail, vessel and road.
4) Liability on e-commerce transactions
Presently, certain VAT authorities are seeking to demand VAT from courier service providers engaged in the delivery of cash on delivery (COD) shipments. This demand is based on the fact that the courier service provider acts as an agent of the e-Commerce vendor. Clarity is required under the Model GST Law to ascertain the liability for the payment of GST on e-commerce transactions.
5) Waybills and check-post related compliances
There is ambiguity as to whether the present system of waybills and check-posts would continue. The Model GST Law grants power to the Government to prescribe documents for consignment of goods exceeding Rs 50,000 in value. In the light of these provisions, it is important that the Transportation and Logistics Industry represent for the removal of waybills and check-posts related compliances, with the objective of hassle-free delivery, lowering operational costs, and consequently enabling competitive pricing.
With the removal of these key shortcomings in the Model GST Law, trade & logistics will be smoother in India.