Increased compliance costs related to goods and services tax (GST), combined with the rising diesel prices, has affected the profitability of transporters.
Increased compliance costs related to goods and services tax (GST), combined with the rising diesel prices, has affected the profitability of transporters in the near term. “Higher compliance costs related to GST due to technological upgradation, up-skilling of workers, penalty charges etc. have added to the cost-burden of transporters, which coupled with the increasing diesel prices, have taken a toll on their profitability,” ICRA said. However, in the longer term, the complete benefit of the GST that includes costs savings due to reduced transportation and warehousing costs is expected to be passed on to the road logistics sector, the study conducted by rating agency said.
ICRA said that merely 10 percent of the transporters indicated their overall costs have reduced post implementation of the GST. Over 40 percent of the transporters suggested that costs were rising, the rating agency added. A study of approximately 50 transport companies (pan-India) and 15 consumer-oriented companies (across various sectors) was conducted by the rating agency ICRA to find out the impact of GST on the ground since its introduction on July 1, 2018.
Truck turnaround time
ICRA also said that the turnaround time for trucks has witnessed a substantial reduction since the introduction of GST a year back. In states such as Kerala, West Bengal, Maharashtra, Madhya Pradesh and Bihar, which were one time known for notoriously high waiting time spent at their borders, the impact has been much more pronounced, the study said.
“The removal of inter-state check-posts has resulted in significant reduction in waiting/idle time for trucks, thereby improving their turn-around time and efficiencies, as confirmed by 60% of transporters that we interacted with. As per ICRA estimates, so far there has been about 18-20% improvement in turnaround time because of GST,” ICRA study said.
The transport operations have become more systematic after introduction of the e-way bill in April 2018, the report said. There are significant time savings and paperwork reduction due to the digitisation of processes, the report added. Furthermore, the implementation of a strict timeline and online recording of every inspection of goods in transit also helped, ICRA study said.