The effect of GST on warehousing and logistics
WAREHOUSING & LOGISTICS

The effect of GST on warehousing and logistics

Introducing the Goods and Services Tax (GST)in India has created a single integrated market with a uniform tax regime. How has the creation of a single market impacted the closely associated logistics and warehousing sector?...

Introducing the Goods and Services Tax (GST)in India has created a single integrated market with a uniform tax regime. How has the creation of a single market impacted the closely associated logistics and warehousing sector? “After the implementation of GST, we have witnessed significant growth in the manufacturing and e-commerce sectors as part of the Government’s ‘Make in India’ push,” says Rajesh Jaggi, Vice Chairman-Real Estate, The Everstone Group. “The consistent tax framework coming into place as a result of the GST rollout has helped raise India’s GDP and allowed for the faster and cheaper movement of goods and commodities across the country.” GST has allowed warehousing operators and owners to optimise inventory levels through centralised regional locations (hub) and reduced their operational/manpower footprint through investments in automation which is essential for managing big-scale facilities, continues Jaggi. “The development of the hub and spoke model has relieved companies from maintaining inventory in every state with large warehouses in major cities overseeing the whole inventory for a region.” Indeed, “after GST, the logistics and warehousing sector is consolidating and centralising its warehouse operations to achieve economies of scale and choosing to operate out of Grade A facilities that can integrate automation and digitisation to increase efficiency and incorporate sustainable elements,” observes Abhijit Malkani, CEO, ESR India. The changes in logistic operations with the advent of GST have led to an increase in opportunities for Grade A warehouses, agrees Jaggi. It’s not been all good, though. While consolidation has undeniable benefits, it also increases the dependence of the supply chain on a lesser number of warehouses than existed before, points out Vivek Rathi, Director – Research, Knight Frank India. “The pandemic exposed this limitation as the logistics operations of several companies were compromised with some of their warehousing locations and cargo transit corridors either being placed under lockdown or facing labour shortage.” Considering that a more dispersed warehousing network could have enabled companies to process orders despite closure of their primary warehouses, Knight Frank expects companies to factor in this disadvantage in their consolidation plans going forward.

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