• Divya Dhomne

Positive Impact of GST

Updated: Aug 5, 2020



The logistics sector is one of the most notable players in the advancement of the Indian economy. Today, Indian Logistic sector stands at an estimated worth of $194 Billion and is expected to increase by $21 Billion in the next 2 years. GST (Goods & Services Tax) owes a huge credit for that in India.

Before GST, things were very tough for the logistic sector due to the complex web of 17 different taxes. Earlier, all states had different taxation systems. The businesses were bound to pay these taxes which in turn raised their overall expense. So, to sustain and operate smoothly in the longer run, the companies resorted to establishing warehouses in different states where they used to operate.

This inadequacy of the taxation system had created issues at various levels. Some of them were

INCREASE IN EXPENDITURE

The capital expenditure of business increases by setting up a warehouse needlessly at different parts of the country. Also, capital resources get locked-in which have a direct impact on the revenue of businesses, especially SMEs.

IMPACT ON BUSINESS EXPANSION

Opening a warehouse is a long and tiresome process. It influences the overall costing of a business, and a lot of business developments also get delayed due to various difficulties involved in establishing a warehouse. Choosing the right location based on the connectivity, capacity, availability, etc can take long. Proper planning and execution can hold up other business expansions.

COMPROMISED TECHNOLOGY

Grade A warehouses are fitted with modern technology with automatic sorters, pick/pact automation, etc. This increases the performance and turnaround time of businesses. However, with Grade C or Grade D warehouses, such infrastructure is not attainable.

OPERATIONAL INEFFICIENCY AT THE WAREHOUSES

Grade A and Grade B warehouses are equipped with the newest technologies. Businesses can store a wide range of products in these warehouses without the risk of deterioration. This helps the businesses make optimal use of the warehouse and its space. However, this is not feasible with semi-utilised warehouses distributed around the country.

TRANSPORTATION COST

Freight carriage holds the largest cost share of the logistic operations of every business. The cost of interstate transportation and taxes collected at the border of the states, collectively increase the overall expense of a business.

With the implementation of GST in India, things changed for good. The Indian logistics and warehousing sector, which used to be a confined commodity earlier, is developing exceptionally with every passing year.


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