Transport sector still reel under GST impact

GST has only increased confusion and a fear for smaller transporters, which has led to a huge number of job losses

After two and half months of Goods and Service Tax (GST) rollout, transporters are still not happy despite the fact that there are now no liquidity crunch and octroi.

Truck rentals have gone up due to diesel price rise in some busy routes. In fact, on many routes freight rates have fallen due to lower demand. The new tax regime under GST has only increased confusion and a fear among smaller transporters, which has led to a huge number of job losses.

"The overall transport demand is lower by average 20 per cent. Turnaround time of trucks has not improved to any significance level. Whatever reduction was seen in faster movements could also be attributed to lower fleet on roads. With sharp rise in diesel price, operating cost of truckers has also increased and those with contractual arrangements only have been able to pass on that", said Navin Gupta, president of All India Motor Transport Congress 

Diesel prices have increased by 10 per cent from june end till date. Industry was trying to recover from demonitisation but with the advent of GST, the problems have continued.

"GST in long run will bring very good business even for transport sector as economy grows, however in initial phase it has posed many challenges rather than opportunities. Freight rates have increased on some routes but on others demand is quite low and operating costs has increased. However, when kharif harvest aseason approaches, in two months down the line, demand will increase by that time as industrial activities would have normalized and freight rates could shot up", said Ashok Shah, chairman, V Trans India Ltd, a road transport company set up in 1958 and now with a group level Rs 800 cr revenue with 650 branches.

He further explained, "transporters are not able to lift goods from unregistered traders as that would require transporters to pay GST on behalf of unregistered traders under reverse credit mechanism (RCM), nor they can claim credit for GST payable on sale of old trucks or tyres etc or they have to take registration when they sale old trucks which they are not supposed to take under GST due to RCM."

Government has said tranposters can go to Forward Credit Mechanism (FCM), where they pay 12 per cent GST but claim full input credit. Navin Gupta said, "This is attractive but tax liability should be made when money is recovered. Today government want transporters to pay it upfront is not a viable for industry where payments are usually delayed."

Many organized players may opt for FCM because that will allow them to claim full 28 per cent GST paid on truck as input credit but there are fears that FCM will drive market to be concentrated in hands of few. "While RCM is a facilitator, FCM proposal has created confusion and that will kick out several small operators which will be a big dampener for job losses." Several lakhs people getting jobs directly or indirectly in transport sector will be impacted.

Truckers also pay huge EMI as most trucks are purchased on lease and many small players are still not able to recover that cost in last few months post GST. Overall scene is not so rosy for truckers as made out to be.

Road transport has a few large organised companies while many small transporters with 1-5 trucks rent out to aggregators. Such small players get business when organised transporters need additional capacities and demand is higher. Hence, in lean period small transporters don't benefit. They are among those who would prefer to remain under RCM to stay away from compliance issues. The transport market may get divided between small and large operators, explained industry source. He said this could lead to consolidation and small truckers may be weeded out from the market.