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One year of GST - Has it really been a game changer for the Road Logistics Sector?

Almost a year after the implementation of the Goods and Services Tax (GST) in July 2017, ICRA took a survey using about 50 transport companies pan-India and 15 consumer-oriented companies across various sectors and the finds have been largely encouraging pointing to several benefits almost disproving much of the hostile criticism. Shamsher Dewan, Vice President, ICRA has given briefly but effectively about the expectations from GST and the factual output.

As for expectations from the road logistics, it believed it would result in faster turnaround for trucks and there will be a shift towards organized players due to greater compliance requirements. It also expected that there would be consolidation of warehousing network thereby leading to more efficiencies in overall supply chain management. 

The output, he says, has seen some positive features like improvement in turn-around time with significant reduction in idle time for trucks, according to 60 percent of transporters. He adds that the impact “has been more pronounced in a few states such as Kerala, West Bengal, Maharashtra, Madhya Pradesh and Bihar, which were earlier known for notoriously high waiting time spent at their inter-state borders.”

With regard to warehouse consolidation, a mixed trend has been observed. Actually, it has varied from sector to sector and company to company. Elaborating further he says, “sectors like FMCG and consumer durables have reported limited consolidation, as maintenance of de-centralised warehouses remains necessary to ensure product availability and timely customer servicing. On the other hand, sectors like tile manufacturing, which have a more predictable demand which can be served from a centralised location, have already consolidated their warehouses.”

Overall, for about 50 percent of the consumer-oriented companies, warehousing network has not been consolidated and for some, consolidation has happened or is in process.

Asked about logistics cost being brought down with GST from the current levels of 13-14 percent of GDP, he said it is to be realized over the longer-term. He said that only 10 percent of the transporters have indicated that their overall costs have reduced post GST implementation while for more than 40 percent, it is not so.“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.

In spite of these short-term pains, it is certainly expected that the reduction in truck turn-around time and setup of efficient warehousing networks would improve the overall efficiency in the system and bring about a reduction in logistics costs. However, this would be realised over a longer period only.

Asked about his take on E-way bill, he replied, “E-way bill, which got implemented from April 2018, has been received positively by the transporter community. Around two-thirds of transport companies we interacted with reported that operations have become more systematic, and there is significant time savings and paperwork reduction due to the digitization of processes. Although few companies faced difficulties due to teething problems like technical glitches, limited awareness etc. the overall response to E-way bill has been positive.”


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