‘GST’ a positive sign of growth for SCM

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.

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