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Published on:
February 20, 2023
By
Prudhvi Raj

Impact analysis of GST on the road transport sector

Goods and Services Tax (GST) is a comprehensive indirect tax that was implemented in India on July 1, 2017. The primary objective of GST is to bring all the indirect taxes under one umbrella and to create a unified market. GST is a destination-based tax system, which means the tax is levied on the point of consumption and not on the point of origin. The road transport sector is one of the most crucial sectors of the Indian economy, and the impact of GST on this sector is significant. This article analyzes the impact of GST on the road transport sector in India.

Impact of GST on the road transport sector

The road transport sector plays a vital role in the Indian economy, as it accounts for over 60% of the total freight movement in the country. GST has had a considerable impact on the road transport sector, and some of the significant impacts are as follows:

1. Reduction in transit time

One of the significant impacts of GST on the road transport sector is a reduction in transit time. Earlier, the state borders used to have long queues of trucks, which led to a delay in the movement of goods. With the implementation of GST, the interstate movement of goods has become more efficient, as there are no more check posts at the state borders. This has resulted in a reduction in transit time and has made the road transport sector more efficient.

2. Increase in compliance cost

The implementation of GST has increased the compliance cost for the road transport sector. Earlier, the transporters used to have to pay taxes at various checkpoints, and the tax rates used to vary from state to state. But with the implementation of GST, the tax rates have become uniform throughout the country, and the transporters have to file their returns online. This has increased their compliance cost, which has had an adverse impact on the small transporters.

3. Increase in operational cost

The implementation of GST has increased the operational cost for the road transport sector. Earlier, the transporters used to have to pay multiple taxes, such as central sales tax, state sales tax, and entry tax, at various checkpoints. But with the implementation of GST, the tax rates have become uniform throughout the country, and the transporters have to pay a single tax. However, the tax rates have increased, which has led to an increase in the operational cost for the transporters.

4. Increase in demand for organized transport

The implementation of GST has increased the demand for organized transport. Earlier, the unorganized transport sector used to dominate the market, as they used to charge lower rates due to tax evasion. But with the implementation of GST, the tax evasion has become almost impossible, and the transporters have to pay taxes at every stage. This has made the organized transport sector more competitive, and the demand for organized transport has increased.

5. Increase in competitiveness

The implementation of GST has increased the competitiveness in the road transport sector. Earlier, the transporters used to charge different rates for the same route, based on the taxes they had to pay. But with the implementation of GST, the tax rates have become uniform throughout the country, and the transporters have to charge similar rates. This has increased the competitiveness in the road transport sector, and the transporters have to provide better services to stay competitive in the market.

Conclusion

The implementation of GST has had a significant impact on the road transport sector in India. While it has reduced the transit time and increased the demand for organized transport, it has also increased the compliance and operational cost for the transporters. The road transport sector is an essential sector of the Indian economy, and the government needs to take necessary steps to minimize the adverse impact of GST on this sector.

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