To make the taxation policy firm and
clear, the Government is planning to announce Goods service Tax (GST) most
likely from 2010. Varied service providers have various perspectives regarding
this new taxation policy of the government. Mr. Monish
Bhalla, CMD, Easy Tax O Legal Services (I) Pvt Ltd evaluated
the logistics sector and recognized this new policy to be a path breaking
strategy with respect to indirect taxation.
In a response with Mr. Vineet
Kanaujia, GM – Marketing, Safexpress, it has been stated that
the Government’s decision of introducing GST from the next year will help in
propelling the growth of Supply Chain & Logistics Sector, it being the
result of our request to the Government to introduce a Uniform Tax Structure
across the country to simplify the Government procedures with respect to
movement of goods. The Dual
GST structure in India – Central GST and State GST will ensure
a higher involvement from the states.
Introduction of GST will play a very
important role in the growth of the Warehousing business in India. It will
enable the manufacturers to manage Distribution Centers (DCs) across India from
very few strategic locations. At present, to save on Central Sales Tax (CST),
manufacturers have to maintain warehouses at multiple locations to show the
movement of goods from one company warehouse to another. However, with the
implementation of GST and phasing out of CST by April 2010, manufacturers will
readily outsource their Warehousing requirements to the Third Party Logistics
Service Provider. This will not only help the manufacturers to save costs, but
they will also be able to focus on their core business.
Moreover, in this budget the Government
has initiated a uniform Service Tax for all the modes of transportation in the
Supply Chain Sector. Till now, Service tax was levied only on Road and Air
Cargo. However, Railway and Coastal Cargo are also being brought under the
Service Tax ambit. This will bring further uniformity in Taxation across the
entire Supply Chain & Logistics sector. Further, the structure of our Economy
has changed radically over the last few years with Service sector now
contributing over 50% to India’s GDP. Our Economy is heavily dependent on the
Service sector for growth, and the livelihood of millions of people depends on
this sector. Therefore, the Government’s initiatives towards strengthening the
Service sector further in this Budget are appreciable. It was also expected
that the Government would increase Service Tax in this budget. However, there
has been no hike in Service Tax, which has been maintained at 10.3% vis-a-vis
12.36% in the previous year. This will definitely aid the continuous growth of
Service sector in India.