GST regime: Input credit to help logistics companies with assets to neutralise tax

Logistics firms that own assets such as trucks, warehouses, loading and unloading equipment, and offer multiple supply chain solutions are expected to gain from the Goods and Services Tax (GST) regime based on their ability to neutralise input credit, said the Indian Foundation of Transport Research and Training (IFTRT), based on an initial analysis.

“For multi-service logistics and contract businesses, the service tax could even be 12 per cent or most likely 18 per cent, though clarity will be in the gazette notification on service tax,” said IFTRT, which has been predicting a 4-10 per cent drop in logistics costs.

The transport research body said that on present revised assessment, on the basis of past experience on service tax that is now merged with the GST regime, the input tax credit benefit — even when the service tax rate is at 18 per cent under the new GST regime — will neutralise the 18 per cent tax for the third and fourth party logistics players.

The new GST business practices will allow borderless trade with India being single common market. Hence, logistics firms stand to gain if they own fleet, warehouses, loading and unloading equipment to make supply chain efficient.

If the so-called logistics firms work as intermediaries or commission agents, then the rate for them has been fixed at five per cent. This is at an effective 4.75 per cent in the service tax regime — which in many cases, was charged at 15 per cent to customers and under-reported to service tax authorities by depositing 4.75 per cent only.

The same has been the case with several established packers, movers and relocators, courier firms, and goods movers, who allegedly charged customers a service tax of 15 per cent while their books reflected 4.75 per cent.

It is now hoped that with large number of anomalies corrected with regard to service tax rates on transportation/logistics, the ‘fly by night’ operators may vanish from the market.

The phase of consolidation, modernisation and upgradation may gradually usher in during the post-GST regime, said IFTRT .

Also, seamless movement of goods carriers through toll booths due fastTAGs or Electric Toll Collection and lifting of inter-state border check posts will boost full round trips by 25-30 per cent in next four-five quarters post-GST, it added.