The Goods and Services Tax (GST) is likely to result in a reduction of documentation for logistics companies, helping them improve their turnaround time and client outreach. The removal of various federal tax barriers and creation of a common market will also improve supply chain efficiency and attract more foreign direct investment (FDI).
Stipulations in the proposed law are expected to result in better tax conformity, while removing the cascading effects of the current tax regime.
“The GST will make doing business in India tax neutral, irrespective of location. For a warehousing operator, investment decisions will no longer be dictated by the comparative tax advantages of various states, thereby enabling them to make decisions based on supply chain efficiencies,” said Jasmine Singh, head – industrial & logistics services, CBRE South Asia Pvt. Ltd., in his article.
According to a survey conducted by CBRE on India’s warehousing industry, more than 63 per cent of the respondents felt that GST would be positive for their overall business operations in India. They are hoping for reduced operating costs, and aiming to consolidate their facilities and expand their footprint around major consumption centres.
Approximately 45 per cent said that their cost of warehousing operations is likely to decline once the GST comes into play, while around 25 per cent were cautious and felt that it is too early to assess the actual impact. However, the majority of respondents said that they are already prepared for GST and would be able to align their business to the new regulations.
About 65 per cent believe that they will need a minimum of 3 to 12 months to align their existing business strategies with the new tax structure.
Close to 52 per cent of survey respondents currently have multiple warehousing facilities in one state/city. When questioned, 28 per cent of respondents said this is the most effective way to operate given the multiple local taxes involved. Close to 38 per cent of companies surveyed also feel that this is the most suitable mode of operation based on their current business model.
However, in the post-GST scenario, the concept of a mother warehousing hub for a region supplemented by spokes is expected to become more popular. Around 11 per cent of companies surveyed said they would prefer to adopt the hub and spoke approach in the post-GST regime, compared to only 6 per cent now.
“Once the GST comes into play, the focus of players is likely to be on supply chain efficiencies which will result in consolidation of warehouses. This will result in increased demand for larger, better quality warehouses thereby providing an ideal platform for the emergence of large scale nationwide players,” added Singh.
The CBRE survey reiterates the fact that most warehousing players view the implementation of GST as a positive move. On the whole, the reform will be in the larger good of the sector resulting in the emergence of better quality, investment worthy assets. (KD)
Source : http://www.fibre2fashion.com/news/textile-news/gst-to-reduce-documentation-for-logistics-firms-cbre-204219-newsdetails.htm