GST will lead to more organised logistics sector: Icra

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New Delhi | May 26, 2017 6:30 PM

The Goods and Service Tax (GST) rollout is likely to improve the flow of goods on account of reduction in turnaround time as VAT related check posts will be removed.

The Goods and Service Tax (GST) rollout is likely to improve the flow of goods on account of reduction in turnaround time as VAT related check posts will be removed. (PTI)

The Goods and Service Tax (GST) rollout is likely to improve the flow of goods on account of reduction in turnaround time as VAT related check posts will be removed. rating agency ICRA said today. The agency said GST implementation will be a positive development for the road logistics sector. Post GST, a more efficient and organised logistics sector is expected to evolve gradually, it added. “The GST regime is likely to have a significant bearing on the way transportation and storage of goods happens across the country,” Icra said in a statement.

The GST would have three major implications for the logistics sector –- consolidation of warehousing network and a shift towards a ‘hub and spoke’ model, higher degree of tax compliance and creation of level playing field between express and traditional transport services, it said. “As the additional 2 per cent CST levied on inter-state sale of goods cease to exist warehouse location would no longer be based on tax considerations and instead would be based on demand considerations – this would also result in consolidation of warehouses,” Icra added.

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The agency expects that over time there will be a shift towards a ‘hub and spoke’ model in which fewer but bigger trucks will move between bigger warehouses. “In addition, flow of goods is expected to improve with reduction in turnaround time as VAT related check posts will be removed. It may lead to 15-20 per cent reduction in the truck stoppage time,” it said. Touted as the most comprehensive tax reform since the Independence, the GST is scheduled to be implemented from July 1.

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