Logistics firms see better fleet utilisation under GST

Logistics companies expect fleet utilisation to climb after the goods and services tax (GST) is imposed on July 1. 

This will bring down logistics costs and improve warehousing. The GST will also organised players in the industry more competitive.

“With the GST, the goods transit time will be lower. A consequence will be higher truck utilisation and increased use of bigger trucks. This will bring down logistics costs,” said P S S Prasad, president, Apollo LogiSolutions.

The Indian Foundation of Transport Research and Training (IFTRT) said the draft GST rules had dispelled misgivings about harassment of transporters on highways. “Doubts about GST procedures have been duly addressed. Moving goods with fake bills will become difficult,” said SP Singh, senior fellow and coordinator, IFTRT. 

But Singh said the highways ministry had a key role to play in ensuring unscrupulous suppliers did not sabotage the implementation of the tax. 

The GST will be positive for the logistics, automobiles, cement, consumer durables and fast-moving consumer goods industries. At present, 80 per cent of goods are moved by common carriers, agents, logistics firms, and packers and movers.

“The design of the GST allows full credit for inter- and intra-state supplies. The procedures prescribed do create inefficiencies, but the basic design integrates the supply chain across states,” said Bipin Sapra, tax partner, EY India.

Companies will have to generate electronic waybills through the GST portal for inter-state movement of goods. While this is an improvement over the current system, there are fears that trucks may still be stopped at state borders.

The prescription of electronic waybills and associated procedures could create difficulties in transportation of goods across states, Sapra added.

Changes are also expected in the way companies plan their warehousing operations. 

“The distribution network now is dominated by small warehouses in every state. Post GST, we anticipate a consolidation of smaller warehouses into a few large ones in the seven key consumption centres in the country,” said Raghav Himatsingka, founder and chief executive officer, Truckola.

This would lead to change in the cargo moved through different routes and the payload capacities of trucks. “We expect a gradual shift towards heavier vehicles,” Himatsingka added.

He said the industry expected vehicle utilisation to climb and overall logistics costs to decline. Warehousing costs, too, would decline due to consolidation, he added.