The Goods & Services Tax (GST), which was rolled out in India on July 1, and its beneficial impact on the transportation sector has, for the second time, found mention in prime minister Narendra Modi’s nation-wide comments.
Following up on the subject first addressed in the ‘Man Ki Baat’ radio programme on July 30, the prime minister spoke about the considerable reduction of time and costs following GST within barely 45 days of the implementation of the reformative tax.
The abolition of inter-state check-posts after the implementation of GST has reduced time for movement of goods by 30 percent and saved thousands of crores of rupees, prime minister Narendra Modi said in his address to the nation from the ramparts of the Red Fort on the occasion of the 71st Independence Day on August 15, as reported by PTI.
GST, which unified more than a dozen central and state levies, is a result of cooperative federalism and its smooth rollout from July 1 has increased efficiencies of business, he said, adding that technology has made the rollout smooth in a short span of time.
Modi said crores of people are behind the success of GST and the implementation of the new indirect tax regime is an example of the benefits that can be reaped if there is cooperative federalism in place between the Centre and states.Business efficiency, he said, has increased. "Efficiency has increased in transport sector by 30 percent and because of GST such a big change has happened," he said."Trucks (carrying goods) are saving 30 percent (travel) time post GST as check-posts have been removed. This has helped save thousands of crores of rupees and more importantly time," he said.
The biggest tax reform since Independence, GST was rolled out from July 1. The new indirect tax regime has subsumed over a dozen state and central levies like excise duty, service tax and VAT, and has replaced them with four-tier tax structure of 5, 12, 18 and 28 per cent for goods and services across the country.
Removing barriers and cutting costs
GST has removed inter-state barriers to convert India into a single market where goods and services can flow seamlessly. State border check-posts scrutinised material and location-based tax compliance, resulting in delays in delivery of goods and cause environment pollution as trucks queue up for clearance.
In pre-GST India, a typical truck spent 20 percent of its plying time at interstate check-posts. On an average, a truck in India runs for around 60,000 kilometres as against 200,000km per annum in developed markets of Europe – very inefficient for the fleet owner. Now, with inter-state check-posts removed in around 22 Indian states, travel time of long-haul trucks are down by around a fifth. As compared to a M&HCVs doing 225km on a typical day, some truckers claim to be clocking between 300-325km a day, a considerable improvement, which can only get better in the days to come.
What’s more, in the pre-GST times, a complex tax structure and considerable paperwork forced the transport industry to spend nearly 50-60 percent of resources on tax compliance and deposit of interstate sales tax. Now, with monitoring, collection of sales tax at interstate barriers obviated, a single GST means increased uptime for trucks, better turnaround and an optimised warehousing structure.
In the pre-GST era, the sector had to bear heavy logistics costs estimated at about 14 percent of the total value of goods as against 6-8 percent in other major countries. It is expected that logistics cost will come down to 10-12 percent of the total value of goods now. The proposed E-way Bill is set to ease the movement of freight further. Goods worth more than Rs 50,000 will require online registration and the receipt would act as a goods ticket for the entire journey.
Photograph courtesy PIB