GST paves way for single-window clearance in logistics sector

With technology push in a right way by the government, leveraging technology to set up logistics industry on the lines of Aadhar and linking it to goods and services tax (GST) network database has become a need of the hour to reduce complexities and prevent fraudulent cases. It becomes an added benefit to reduce logistics costs and improve the competitive edge. The present documentation is complex due to different formats used across various states and departments, separate physical checks for varied taxes, insufficient use of technology and inadequate use of IT infrastructure.   Radio Frequency Identification (RFID) tags on vehicles for electronic toll collection and global positioning system (GPS) devices may provide the building block for this initiative, which will help in accessing information related to the consignment, vehicle, driver and location, thereby enabling verification, as per report submitted by consulting firm AT Kearney for the ministry of road transport and highways.   India has been struggling with high logistic costs of 16-18 per cent (as a percentage of cost of the product), which make its exports uncompetitive vis-à-vis those of China, where logistics costs make up 8-10 per cent. India’s logistics cost as a percentage of its gross domestic product was 13-14 per cent in 2014.   The World Bank’s Logistics Performance Index (LPI) ranked India at the 54th position (2014), with the country losing $6.6 billion every year in transportation delays for freight, according to a study.   The report, which studied logistics systems across Hungary, Turkey, the US, Germany and Japan recommended that technology be used to set up modules such as Vahan Aadhaar, Logistics Park Information System (LPIS) and Road and Traffic Information System (RTIS). Introduction of a common system to link GSTN database with Vahan and Sarathi will allow for more streamlined movement of goods in the country.   Brijesh Lohia, Managing Director, Global Ocean Group, says, “The Sarathi database can envision a centralized repository of driver-related information. LPIS and RTIS will provide a central interface to handle consignment traceability, reservations of resources and services; and storage and dissemination of information about road and traffic conditions, respectively. These will help in the simplification of documentation and procedures during the inter-state freight movement and also help in curbing the illegal movement of goods.”   “Vahan Aadhaar concept will comprehensively capture all aspects of end-to-end movement of freight in a single system,” he adds.   The government has over the last few months moved swiftly to link many government schemes with Aadhaar. It has linked Aadhaar to the Permanent Account Number (PAN) used in filing of tax returns, and even for procuring a driving licence and vehicle registration number.   With the introduction of GST, India will become a seamless market without any difference between inter-state or intra-state sales. Service providers would be incentivised to leverage hub-and-spoke supply chain networks by operating large central warehouses and remodeling transportation routes. On the taxation front, at national level, it will result in more competent and efficient cross-state transportation, lesser paperwork for transporters, thereby reducing the logistics costs. Not just costs, it will also save a lot of transportation time. As transporters are resorting to digital space to book trucks, the scope of online truck booking in India is broad. Industry analysts anticipate that the largest warehouses will come up in the seven largest consumption centres of the country catering to more than 50 per cent of the country’s needs. The rest of the country will be served from these large warehouses via secondary dispatch. Finally, the requirements for long distance trucks will increase due to consolidation of warehouses and long distance secondary dispatches. The logistics sector in India, including the 3PLs is a highly fragmented with highly inefficient supply chains of the firms. Post GST companies will receive added incentive to either develop its own logistics arm or tie up with the domain experts who are 3PL companies. This will benefit the companies as a system of seamless tax-credits throughout the value chain and across state boundaries will bring down the cascading effect of taxes and thus reduce the hidden costs of doing business.