Cost and Value is an important requirement for logistic sector

Demand is a problem in many of the developed countries, but managing those demand has been the biggest challenge in India. And so, the logistic sector is helping in managing the demand of supply chain, where it manages the flow of things from the initial stage to the final stage of consumption in order to meet the requirement of the corporations. This includes the physical items such as food, materials, animals, equipment, and liquids even the abstract items such as time and information to operate.

The items mainly draw in logistic sector usually involves the flow of information, handling material, production, packaging, inventory, transportation, warehousing, and often security. Increasing in the flows of transportation has been thus a fundamental component of modern changes in economic systems at the global, regional and local scales. These changes are not merely quantitative with more transportation in motion, but also structural and operational.

Structural changes involve manufacturing systems with their expanding geography of production, while operational changes mainly focus on bulk transportation with its geography of distribution. The working of logistics enables a greater efficiency of movements with an appropriate choice of modes, terminals, routes, and scheduling. The purpose of logistics sector is to make available goods, raw materials and commodities, fulfilling four major requirements related to order, delivery, quality and cost fulfillment.

And thus logistic sector is considered as multidimensional value added activity including production, location, time and control of elements of the supply chain.

True, transportation is a crucial juncture which acts as the nervous system of the economy in India.

In the current scenario of the logistics in generating revenue in India is low as compared to other developed countries. Problems faced by the Indian logistic industry:

  • Deteriorating the conditions of roads in the country is no less even today.
  • The middlemen trouble (breakage and increase of overall operational cost) while moving from one state to another.
  • Lack of GPS trackers in vehicle reduces the transparency for customers and the driver.
  • Cost associated with transportation remains constant including variety of bribery in different states.
  • Being the crucial part in the manipulation of logistic, transportation involves moving load, delivery speed, service quality, operation costs, the usage of facilities and energy saving.
  • Cost of petrol creates a major impact on the cost of certain products which will result in significant changes in supply chain

But in the same line, it is important to understand the growth aspects in the logistic industry –

  • The increase in investment from both public and private sector y-o-y
  • When India becomes the manufacturing hub
  • Infiltration of e-commerce giants into the hyper-local delivery segment and express

In India transportation alone holds 60% share of logistic industry and rest 40% is contributed by warehousing, value-added logistics, etc. Being the backbone of manufacturing and trading activities in the economy logistics has an important role to play, where the expenditure is rising and demand is always high. Before GST sets its foot in Indian market it is important to know the before and after effect of GST in logistic sector.

The indirect tax system in India is not only complex with various taxes applicable to an industry but also widely seen to be bungling and difficult. Another aspect of the system is that taxes are non-creditable moreover due to restriction in the law or because there is no compatibility between central and state levies.  In addition to this, a result of multiple applicable levies, the charge engaged in the making of goods, sale of goods and provision of services has to fulfil with payment, reporting and review required under such special tax authorities. The GST system has put down to renovate the present indirect tax rule with the purpose of addressing the above-mentioned issues.

The major alteration projected under the GST system is that GST will involve one effective duty of tax on a business as compared to the multiple levies of tax. GST will be a dual tax levied by both central and state government on the supply of goods and services.

For many who think GST has increased the cost of every item today, should know that the recent GST has brought the cost of logistic sector fall down by 5-10%. For the first time, the logistic sector has got the right platform, where they are appreciated and supported for the cost conscious market.

Well GST does bring double positive impact in the logistic sector in India. Transportation mainly works on road and time spent at Interstate check posts due to a difference in taxes between states accounts to idle time has been eliminated in GST regime. Hence, transport time would reduce by 10-15% % and the cost of transportation will be by 5-10% % which will reduce the costs for customers and logistics companies, making it more efficient and profitable.

In simple terms, one can say this as “cost reduction and value creation”.

Sumit Sharma, Co-Founder, GoBolt

Sumit Sharma

The author is Co-founder of GoBolt, Next Gen Tech-Logistics Company based out of Delhi NCR

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