Published on:
January 25, 2023
Shreeja Ray

Impact of GST on Logistics Industry

It would hardly be an understatement to refer to logistics as the backbone of the rapidly changing Indian economy given that it is a sector that holds together countless manufacturing and trading activities in the nation on a daily basis and is constantly working to bridge the shaky gap between rising demand and timely supply. The logistics sector efficiently contributes to the timely, safe, and proper delivery of goods and services to the end consumer via a strong supply chain thanks to the alignment of infrastructure, technology, and numerous service providers. Therefore, it is crucial to comprehend how GST would affect logistics.

Positive impact of GST on the logistics sector-

Easy delivery of goods that reduces transportation time

Road travel is the most used mode of transportation. Trucks typically spend 20% of their running time at highway inspection points. Reduced cooperation at these Interstate checkpoints reduces the amount of trouble with transportation. VAT forms are no longer required, and the deletion of OCTROI has cleared traffic in Mumbai and other cities. Transit time is reduced and a smooth flow of goods is ensured by a consistent tax system without different levies. Low delivery times also result in a 10 to 15% decrease in distribution expenses, which lowers the final cost of the items.

Benefit for MSMEs

MSMEs are now less dependent on tax specialists than under the prior system because of a simplified return filing procedure. The rationalization of the composition scheme and the introduction of a quarterly reporting option for taxpayers with a turnover of less than Rs 1.5 crores were both excellent steps.

Improved warehouse organization

Businesses had to set up and run multiple warehouses in each state because of the GST and other state admission fees. GST does away with the need for each state to maintain a warehouse. The logistics chain will become more efficient and leaner as a result. As a result, more FDI in warehousing will be promoted.

Issues the logistics sector is facing under the GST regime:

1) Petrol and diesel are important raw materials for the logistics sector. Since gasoline and diesel are exempt from GST, the industry is forced to pay taxes (such as ED, VAT, and CST) on those products.

2) Despite the sharp decline in crude oil prices, the State and Central Governments significantly increased the VAT and excise duty on gasoline and diesel to increase revenue.

3) In light of the decline in oil prices, the government should either lower the VAT and excise duty on gasoline and diesel or include petroleum items in the GST net. This will ease a great deal of the load on this industry and preserve some cash flow.

4) Despite Board Circulars and numerous court rulings being in vogue, GST officers are treating transportation services that include loading and unloading as cargo handling and requesting the GST at 18% instead of 5%.

5) Transportation services, including loading and unloading, are subject to a 5% tax. Tax of 5% is also due on waiting time fees, detention fees, bonuses, and any other incidentals.

6) Indian Railway continues to adopt the position that certain parts of the rail transportation of agricultural commodities should be taxed, neglecting the idea of composite supply, which drives up costs. To make sure that the benefit is actually distributed, it should be reviewed again.

7) When raising an E-way Bill, transporters do not have a proper, recorded agreement with the consignor and consignee. This causes conflict between them in the event that the products or vehicles are seized or taken away.

8) Given that the receiving site invariably includes exempted supplies (for ITC purposes), cross charging (if applicable) has been a severe concern for transporters located across numerous States, leading to valuation problems and increased costs for company.


Are MSMEs free from GST?

Businesses with an annual revenue of less than Rs 6 crore are excluded from the new legislation, according to a finance ministry official. MSMEs are exempt from the requirement to pay at least 1% of their GST liabilities in cash.

How does GTA work?

The term "goods transport agency" refers to any entity that provides services linked to the movement of goods by road and issues consignment notes, regardless of the name used (GTA).

What is 3RD Party Logistics, exactly?

 3rd PL offers outsourcing services and gives businesses in need, like Gati Ltd., inventory management, warehousing, and distribution services.

What distinguishes OCTROI and TOLL from one other?

A "toll" is levied for using the roads by both people and animals, whereas octroi is collected on goods that enter the corporation's boundaries for use, consumption, or sale. Octroi was eliminated after the introduction of GST.

Do Logistics fall inside the scope of GST?

The answer is that GST is charged at a rate of 5% (2.5% CGST and 2.5% SGST) on services rendered by a GTA in connection with the transportation of goods (including used home items for personal use).


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Updated on:
March 16, 2024