BUSINESS

‘GST can lower cost of logistics industry by 20 per cent’

COST CUT:Transportation contributes the lion’s chunk of60 per cent of the logistic pie.— FILE PHOTO

COST CUT:Transportation contributes the lion’s chunk of60 per cent of the logistic pie.— FILE PHOTO  

Logistics industry is projected to grow at a compounded annual growth rate of 15-20 per cent between 2015-16 and 2019-20 that will get a further boost if GST is rolled out from this year, which can trim costs by 20 per cent, says a report.

The much-delayed GST rollout can help boost the GDP by 100-200 bps as this will help faster and cheaper movement of goods across the country with a uniform taxation structure, said a report by Care Ratings.

Growth



“Logistics industry is likely to clip at CAGR of 15-20 per cent during 2015-16 to 2019-20 and if GST is rolled out this year this can bring down the logistic costs by up to 20 per cent from the present levels,” it said.

Cost can also come down drastically as a one-nation-one- tax GST structure can massively reduce the long and winding queues at border check-points and other entry points within and between the states.

Warehouse revamp

Another reason for lower logistics cost is that operators will be able to rationalize and restructure their warehouses and other logistical infrastructure.

Due to trade barriers such as the entry tax, local body tax, octroi and other hurdles, trucks idle for 30-40 per cent of the day, leading to huge man-hour and fuel losses, says the report. Since GST will be levied on goods transportation and full credit will be available on interstate transactions, logistic cost is expected to come down by 1.5-2 per cent of sales due to warehouse optimistion and lower inventory cost.



E-commerce

A higher growth of the logistics industry will be driven by e-commerce, GST rollout, the new national integrated logistics policy, and 100 per cent FDI in warehouses etc. But in spite of the large potential, it remains entangled in complexities such as higher costs, a myriad of complex tax structures. — PTI

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