The soon-to-be-implemented Goods and Services Tax (GST), the country’s biggest indirect tax reform, will bring long-term gains to the e-commerce and logistics sectors albeit with a few hiccups in the short term.
At a panel discussion during the 2017 edition of News Corp VCCircle E-commerce Summit, industry participants said that implementation of the GST from July will help reduce costs for companies.
The participants said the unified tax code will help companies have fewer warehouses in the future as compared with having warehouses and storage facilities in nearly every state to meet the last-mile delivery requirements.
For instance, Maharashtra imposes a higher rate of state levies compared with neighbouring states such as Madhya Pradesh, Andhra Pradesh and even Gujarat.
“Costs incurred by the logistics sector will reduce after the implementation of the GST,” said Abhishek Bansal, co-founder and CEO at Shadowfax, a pan-India technology-based logistics service provider.
Mithun Srivatsa, co-founder at logistics marketplace Blowhorn Ltd, said that the GST will be a game changer in the inter-city segment and help in faster movement of goods between states, although intra-city offers bigger business opportunities.
“Implementation of the GST will help the sector with better network planning and warehouse locations. However, what bothers me is the quality of government infrastructure and whether it will be able to withstand the load,” Srivatsa said.
“We are ready...but consumers may have a lot of trouble understanding the structures and requirements. It will be a time-consuming process,” he added.
Rajinder Balaraman, vice president at Matrix Partners and the moderator of the panel, cited the example of Malaysia and the difficulty it faced after the country introduced its tax reforms roughly 15 years ago.
“Startups should be prepared for GST. There will be short-term uncertainty and switchover challenges, but technology-led companies will be better placed than traditional companies to handle [such challenges],” he said.