Since 2000, we have been in an endless debate over Goods and Services Tax (GST). Given our diverse melee, from politics to culture, from plans to concepts, from calculation to coherence, the roadblocks to a new tax system were presumable. But, now it seems to be stretched a bit far beyond the cognizable as we may miss yet another deadline.
Beyond the perceptible political contours or financial compulsions, a few have realised about the obscure confusions prevailing in some key sectors, while waiting for the passage of the current GST Bill stalled in the Parliament. People have been projecting it as the ‘next big thing’ for the logistics sector, which is definitely one of the key segments to be impacted by the GST. The reports claiming that the costs in logistics will be reduced by up to 30 per cent through GST in the next few years had raised hopes among us. But, none is talking seriously about the dilemma faced by the logistics players while waiting in the wings with bated breath.
It is sure that this financial reform to create a unified market would spell some benefits for the 3PL players. On the positive note, the biggest impact will be on the movement of trucks which still account for 65 per cent of India’s freight. Truck delays estimated at inter-state checkpoints are about five-to-seven hours. Along with other delays, 60 per cent of transit time is lost currently. But, how GST will change the game will depend on the finer points in the rules. Still trucks can be held up, if the authorities ask for verification of papers/documents which will still create the same queues. So, a lot depends on the rules on the paper.
From our point of view, GST will also require us to revisit, rationalise and re-engineer the strategies and networks, which is not an easy task. First of all, GST roll-out will mean reworking our investment plans for the technology, warehousing and networks. GST will pave way for developing of logistics infrastructure and taking investments to the next level, financial experts say. But, the uncertainty in GST formula and execution plan has forced us shelve our investments and future plans.
Secondly, the most important area to be impacted will be warehousing sector. The direct fall-out is the GST will prompt the logistic players to overhaul and compress the warehousing setup. Realigning warehouse system is on the cards. By using technology, we will be able to optimise the execution system also. Realigning of networks attached to logistics hubs also will happen under the GST.
This will force us to re-think on business operations, including creating new warehousing and logistic locations. Whether to expand or to close, whether to increase the size or move to the manufacturing locations, will be million dollar questions for us. So, it is important that we get some finite decisions on GST.
Another area is supply chain which will witness dramatic overhauling under the GST which will also promote the logistic sector to get more organised and techno-friendly. But, the responsibility on the organised sector will also increase as they have to cope with the demands.
A look at the current logistic scenario must be encouraging. With the e-commerce evolving in the country, logistics players have got a new bout of growth in the recent times. While looking to grab the opportunities, the logistic industry itself is coming out of the age, in terms of technology and efficiency. The growth momentum is expected to continue in the coming years too.
Given all these situations, delay in GST means a lot for the logistic industry. It may open new opportunities or not. It may trigger uneasy pressure or not, especially on the unorganised players. But delay in the passage of GST itself means pain down the neck for logistic companies who are in a fix about their future plans and investments. We are one of those who sit still fingers crossed. But question is how long?
(Areef Patel is vice chairman of Patel Integrated Logistics Ltd; Views are his.)
