Budget 2018: Logistics industry expects steps to decrease logistics costs as a chunk of GDP

Date: 2018-01-31
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The logistics industry expects steps that would decrease logistics costs as a chunk of GDP as well as simplify the implementation of the goods and services tax (GST) said industry captains and experts.

"Logistics costs as part of GDP is still 13%-15%, a percentage much lower in other countries. We would welcome whatever steps the government takes to make that chunk smaller," said George Lawson, managing director at DHL Global Forwarding, India.

"Currently, the transportation revenue is subject to tax deducted at source at 2%. This puts huge pressure on cash flow as TDS today is far more than tax liability. Though there is a provision for reduced rate of tax, it takes lot of time and administrative burden asking for it. Every year, 3PL companies like Mahindra Logistics files its ROI with huge tax refund eligibility," said Pirojshaw Sarkari, CEO, Mahindra Logistics.

"As per current provisions, there is an option for a transporter to either pay GST under reverse charge mechanism (RCM) under which ultimate recipient of services pay the applicable GST, or under forward charge mechanism (FCM). Using FCM would be an advantage for the service provider (as it entitles it to claim the input tax credit for all the inputs), but it requires that if it is adopted, it needs to be adopted for all its customers. This need to be made customer specific, as it is not necessary for all customer to agree/not agree for FCM. This puts lot of difficulties for a transporter to align with its customers," he said.

He added that the proposed implementation of e-way bills need to have compulsory closing mechanism from the consignee on delivery of goods at the destination. 

"This will do away with the requirement of paper acknowledgment of delivery of goods and will reduce huge administrative burden of the transport service providers," said Sarkari.

"Also, further investments should be channelized with respect to an integrated transport and logistics policy so that enhancements in terminal capacities, transport networks and ancillary infrastructure can be appropriately prioritised across states," said Peeyush Naidu, partner, Deloitte.

"For instance, development of an optimal modal mix for the country - even under a unified union (including railways), would need coordination action across Central & State Government agencies such as Customs, DGFT, Railways, ports, airports, inland waterways, coastal shipping etc. in terms of master planning, integration with relevant local plans, approval processes, interfaces between infrastructure developed by different agencies, etc. The union budget could provide an impetus to this through appropriate institutional mechanisms and potentially supporting the Logistics division in the Department of Commerce for coordinating an "integrated development of Logistics sector" he added.

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