How Technology Will Help Logistics Sector Post-GST
Logistics has been bearing the brunt of the indirect taxation system since its inception. With a plethora of taxes and taxes over taxes, the sector’s journey has been a stop-start, literally as well. They have been awaiting tax singularity like farmers waiting for the rains. The ‘One Nation, One Tax’ regime is finally here, and is shaping up to be the sweet karma for all the wait. With the Goods and Services Tax (GST), supply chain process bottlenecks like waiting at tollbooths, interstate taxes, and distant warehouses are expected to be loosened to a considerable extent.
The shift to a ‘hub and spoke’ model, with the introduction of logistics parks at active sites across the country, is the first step towards warehouse consolidation. This change is a huge step forward towards cost savings for traditional enterprises and good customer experience in the e-Commerce sector.
Previously, for example, a product from Karnataka taxed at, say, 5 percent would be around 12 percent of the same in Maharashtra. Hence, the online marketplaces list and buy the product for the cheaper rate, then dispatch it to the customer location at a different state, and end up delaying said orders. With GST in place, the warehouses will adopt distribution based on demand considerations as opposed to taxes. One can say that the new regime is a large scale leveling of the playing field. The trucking industry, the backbone of road logistics, has gained notoriety for being poorly organized and fragmented. They feed off convenience and proximity, as local enterprises fall back to them in a last-ditch effort. A sector like that is a breeding ground for poor quality and efficiency. With the shift to logistics hubs, bigger and fewer trucks are expected to foray into the field. With the reduction in turnaround time at VAT-based check posts, the flow of goods is set to be seamless and cheaper than it used to be. Doing away with hard copies of verification documents, compliance to GST is kept track of digitally. Electronic (e-way) bills will be generated and sent to logistics operators and drivers of cargo vehicles.
These bills will be used to track all interstate and intrastate movement of goods and compliance, and is sure to bring transparency to the new procedures and policies. Also, in a passive aggressive move, the government has announced a hypothetical ‘anti-profiteering’ clause in case companies decide to opt against compliance. The clause centers around a body which will decide whether businesses have reduced their prices enough when there is a reduction in the GST rate of a particular good or service.
For the lot that have been playing for a while, there will be short-term uncertainty and adoption challenges. Now that untapped markets within the country seem more accessible with the GST benefits, the logistics sector is set to open up new lanes with its existing infrastructure. In first glance, it would seem like a long road, but with the right technology, it may not feel the same. Profitability need not stop at just the taxation, it can be increased further with the likes of route and resource optimization, fleet management, and planning.
Logistics technology platforms like Locus are firmly poised to make life easier for this lot by helping them adapt to the many changes and make the best use of the regime. Post-GST logistics will witness easier tracking of consignments, and reduced ETAs, especially in the first-mile. The hub-and-spoke model is sure to ignite newer and more transparent management systems. With warehouses growing in size and losing in numbers, they are expected to be more effective.
GST will set in motion a domino effect that is sure to affect players from all fields. It is sure to irk some off, while the rest are already reaping its benefits. As a corporate analogy, it is the equivalent of a data-driven business decision. It will take a while to gain any form of traction, with some employees questioning it. Shaking the established order can prove to be a sight that no one can stand. Until a time comes when it makes sense. The government is in it for the long haul, and it is time consumers brace for unbiased uniformity.
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