The sector expected to benefit the most on the back of GST implementation in India is the logistics sector. Traders as well as investors have shifted focus to these logistics players because organized players in this sector are likely to benefit due to GST.
Transporters will be required to be GST-compliant for their customers to receive input tax credit. This will lead to a makeover of the supply chain management triggering the move of Industry’s logistics requirement from the unorganised to organised market. This is a hugely fragmented market with almost 85% of the market share with the unorganized segment. The price difference in express logistics is almost 30% between organized and unorganized players and the provision of availing input tax credit will drive a positive chain towards the organized sector.
The one big change the existing model will undergo is that with the introduction of GST, the check posts at every state border will be done away with and thus transportation across states is likely to happen more seamlessly.
Warehousing/logistics cost is almost 3-3.5% of a typical company’s sales and there could be substantial margin benefits if there is consolidation. GST rates in transportation and logistics.
Aligned to this transformation is the need of the concept of an E-Way bill which is expected to drastically reduce paperwork and corruption. Under GST, freight worth over INR50,000 will require obtaining a prior registration and generation of an e-way bill and will be used to track all inter-State and intra-State movement of goods. E-way bill is an electronic way bill for movement of goods which can be generated on the GSTN (common portal). When an eway bill is generated a unique e-way bill number (EBN) would be allocated and be made available to supplier, recipient, and the transporter. An e-way bill is valid for specific periods, which is based on the distance travelled by the goods.
|Services||Earlier tax rates||New GST Rates|
|Transport of goods by rail||5% with ITC of input services||5% with ITC of input services|
|Transport of goods in containers by rail (except by railways)||6% with ITC on services||12% with full Input tax credit|
|Services of GTA in relation to transportation of goods||4.5%. No ITC||5%. No ITC|
|Express logistics/ supply chain/ cold chain||15% with part ITC||18% with full ITC|
|CFS/ICD||15% with part ITC||18% with full ITC|
Let’s also have a look at a few logistics companies listed on Indian exchanges.
|Company Name||Market Cap|
|Inter State Oil||6.39|