IMPACT OF GST ON LOGISTICS

SECTOR

Submitted to –
Sebastian Daniel
Introduction

A system that ensures proper and smooth movement of product or services in

the entire supply passage resulting in proper and timely delivery. The overall
logistics system includes packaging, storage, handling and transportation along
with proper information flow.
Logistics services, Information Systems and Infrastructure/Resources are 3
closely linked components
 Logistics services includes physical activities and non – physical activities.
 Information systems provide essential data and consultation in each step.
 Infrastructure comprises human resources, financial resources, packaging
materials, warehouses, transport and communications.

Forms of logistics Operations

1. Supply Chain Management

 It is a concept for handling production procedures in broad
sense.

2. Reverse Logistics
 The process of moving goods from their typical final destination
for the purpose of capturing value, or proper disposal.
 Two main reasons for rise of reverse logistics
- Globalization of markets
- Policies for environment protection
3. Maritime Logistics

 Maritime Industry anything related to the ocean, sea, ships,

navigation of ships from point A to point B, seafarers, ship
owning and other related activities.
 Vital for transportation of particular goods like crude oil and
grains
 Cheap and high carrying capacity.

Operation of maritime industry is of three main types

- Liner Shipping – Business based on same ships, regular
voyages.
-Tramp Shipping – Irregular transport routes, Unsteady
transport routes.
-Industry Shipping – Main purpose of this is to supply raw
materials.

4. Land Logistics

 Extends the delivery services for air and maritime from airports
and seas.
 Main transport modes are railway transport, road freight
transport and pipeline transport.

4. Air Freight Logistics

 Delivery with speed, low risk of damage, security, flexibility
 Disadvantage is high fee.
Goods and Services Tax

GST is a consumption based tax levied on sale, manufacture and consumption

on goods & services at a national level. This tax will be substitute for all indirect
tax levied by state and central government.
On advent of GST, it will make tax system simpler, help in increased compliance,
boost tax revenues, reduced tax outflow in the hands of consumers and make
exports competitive.
Countries like Singapore and New Zealand use single GST, but India has opted
for a dual GST model.
The following central and state taxes are integrated into GST.
Central Taxes: State Taxes:

 Excise duty  State VAT

 Service tax  State Excise
 CVD  Luxury Tax
 CST  Entertainment tax
 Various Cess  Entry tax
 Additional Customs Duty

Impact on Suppy Chain Management

By eliminating state taxes, the logistics companies are encouraged
consolidate their warehouses instead of maintaining one in each state to avoid
central tax. This directly affects the final cost of the product bring the selling
price down as a result of that companies can invest more to improve their
serviceability.
The following are the benefits enjoyed by companies after the
implementation of GST:

 Interstate sourcing of raw materials

 Price negotiation

 Improvement in quality

 Better forecasting

 Improved inventory management

 Better trade-off between cost and customer service

 Capacity expansion
  Greater flexibility in manufacturing

Impact On Warehousing
Some companies prefer to have warehouses in every state of
the country to avoid local taxation while transporting from one
location to another.
With the implementation of GST, logistics companies can have
one central warehouse or can go for the warehouses at specific
locations or can adopt a hub and spoke model. This enables the
companies to achieve cost efficiency in their operations and thereby
transferring this cost benefit to the end consumer in the supply chain.
The disadvantage of this is that companies face difficulties during
route planning to deal with deliveries across a bigger geography.
Sr no Particulars Old System Under GST
1 Contracting with Contracts entered on a pan Contracts on pan India
sellers India basis basis continue

2 Payment of taxes Rate – 15% Services would be

subject to CGST +
SGST or IGST
depending on the
location of the
contractual recipient
Entry Tax Entry tax is a tax No Entry Tax
3 levied on entry of
goods (as specified) into
the local
area for consumption,
use or sale, same
is a cost
4 VAT/CST on inputs CST/VAT charged on While there are
procured at the local/interstate minimal input
delivery hubs input procurements procurement in the
are not eligible delivery hubs, the
as credit under the taxes on such
current regime procurement would
no more be a cost in
the system
Goods Transport Agency
GTA means any person who provides service in relation to transport of
goods by road and issues consignment note.

A consignment note is serially numbered and contains –

 Name of consignor
 Name of consignee
 Registration number of the goods carriage in which the goods are
transported
 Details of the goods
 Place of origin
 Place of destination.
 Person liable to pay GST – consignor, consignee, or the GTA.

Payment when there is Reverse Charge

As per Notification No. 13/2017- Central Tax dated 28/06/2017 the person who
pays or is liable to pay freight for the transportation of goods by road in goods
carriage, located in the taxable territory shall be treated as the receiver of
service.

Payment by sender
If the supplier of goods (consignor) pays the GTA, then the sender will be
treated as the recipient. If he belongs to the category of persons above then he
will pay GST on reverse charge basis.

Payment by Receiver
If the liability of freight payment lies with the receiver (Consignee), then the
receiver of goods will be treated as a receiver of transportation services. If he
belongs to any of the above category of persons, then he will pay GST on
reverse charge basis.

GST on Freight
Rate of GST on Freight charges is 5%

Exemptions
- Transport of agricultural produce
- Transport of milk, salt, food grains including rice, flour, pulses
- Transport of organic manure
 - Transport of newspapers or magazines registered with the Registrar
of Newspapers.
- Transport of relief materials for victims of natural or man-made
disasters, calamities, accidents or mishaps.
- Transport of defence or military equipment.
- Transport of any goods, where the gross amount charged for
transportation for a consignment transported in a single carriage is
less than Rs. 1,500.

SCHEDULE OF GST RATES FOR TRANSPORT SERVICES

1. Transport of passengers by rail (other than sleeper class) – 5% with ITC (Input
Tax Credit) of input services

2. Renting of motor cab – 5% (If fuel cost is borne by the service recipient, i.e.
Self-drive, then 18% GST will apply)

3. Transport of passengers, by- (i) Air conditioned contract/stage carriage other

than motor cab – 5%

4. GST exemptions: Services by way of giving on hire to a state transport

undertaking, a motor vehicle meant to carry more than twelve passengers

Service of transportation of passengers, with or without accompanied

belongings, by—

(i) Railways in a class other than (A) first class; or (B) an air-conditioned
coach

(ii) Metro, monorail or tramway;

(iii) Inland waterways;

(iv) Public transport, other than predominantly for tourism purpose, in a

vessel between places located in India; and

(v) Metered cabs or auto rickshaws (including E-rickshaws);

SCHEDULE OF GST RATES FOR GOODS

1. Electrically operated vehicles, including two and three wheeled electric motor
vehicles – 12%

2. Motor vehicles (including Parts and accessories) for the transport of ten or
more persons, including the driver – 28%

3. New pneumatic tyres, of rubber used in motor cars, buses or lorries, aircraft,
motor cycles etc – 28%

Person liable to pay GST

- The recipient of service will be the person who makes the payment of
freight charges.

Recipient belong to specified Recipient does not belong to

category specified category

- A person registered under GST - Unregistered Sole Proprietor

- A factory registered under or
governed by the Factories Act,
1948
- A Society registered under
Societies Registration Act, 1860 or
under any other law for the time
being in force in any part of India
- A co-operative society
established by or under any law
- A body corporate established by
or under any law
- A partnership firm, whether
registered or not under any law,
including association of persons
- A casual taxable person
Any person in the above list of
- Unregistered HUF (Hindu
Undivided Family)
- Unregistered BOI (Body of
Individuals)
If registered GTA provides services
to above persons then GTA is liable
to pay tax
If Unregistered GTA provides
services to above persons then GTA
as well as the recipient of service is
not liable to pay tax.
Where a registered GTA is liable to
pay tax 2 options are available to
him
- Pay tax @ 5% with no input