Sucheta Dalal :Logistics may enjoy tax credits paid with GST
Sucheta Dalal

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Logistics may enjoy tax credits paid with GST  

November 12, 2009

The goods and services tax (GST), likely to be introduced from April 2010, will not adversely affect most industries, say tax experts. Experts anticipate GST rates to be as high as 18% to 20%. With the implementation of GST, some industries like logistics that were earlier deprived of availing tax credits will now be able to enjoy them.


“Increase of rates will not affect most of the industries. In fact, in many cases, you may find effectively there is a reduction of tax,” said Parind Mehta, Partner, BSR and Co, a chartered accountancy firm.


“Every business which has to bear certain taxes or tax costs will now be able to avail credits after the GST. For example, the logistics industry currently does not get a credit on the paid value added taxes (VAT), but they will now be entitled to those. Manufacturing entity or the traders, who do not get credits on the paid service tax, will also be benefited from the GST,” Mr Mehta said.


The GST would cover all goods and services, except for petroleum and liquor.


“GST will lead to the simplification of the supply chain. With it, you will have to pay a uniform sales tax irrespective of whether you supply from a local destination or from another state. Certain businesses have scope to do away with some layers of warehousing. They will now be in a position to do away with the mother warehouse or the regional warehouse leading to simplification of the supply chain. With some changes, they would be able to reduce their number of stock points,” Mr Mehta added.


All taxes related to inter-state transactions will be termed as intermediate taxes and will be paid to the Union government.


Talking about the advantage of GST, Mr Mehta said, “GST is a comprehensive law that integrates all direct tax laws. It also has better clarity. You will have simplified procedures. Best of all you it is going to eliminate your tax-cutting effects on taxes. There is not going to be any tax on tax. Abolition of the central sales tax (CST) will also be a positive change for the logistics industry.”


However, what currently remains a serious concern for logistics operators is of ocean freight and rail freight that are likely to be charged, with the introduction of the new GST. At present, ocean freight and rail freight are not charged. Octroi duty is another issue for the logistics operators, as its rates differ from state to state.


“Inclusion of octroi in the GST could add up another 1.5% to 2% in the overall tax and hence is not acceptable to the industry. Thus, till now the octroi has been excluded from the GST,” said Mr Mehta.
Amritha Pillay [email protected]

-- Sucheta Dalal