The proposed goods and services tax (GST) if implemented well will result in substantial reduction in logistics costs and consolidation of warehousing facilities, according to a CII-PWC report.
An inefficient logistics network created using smaller warehouses to save on state taxes has resulted in higher costs and increased inventory levels, it noted.
"It is anticipated that GST will result in consolidation of warehousing alongside facilitating seamless inter-state flow of goods. GST is also expected to provide an opportunity to dismantle various check posts, thus bringing about a substantial reduction in logistics costs," it said.
Currently, a complex web of subsidies, tariffs and cascading taxation in the transport and logistics sector has resulted in distorted pricing, created wasteful leakages and opportunities for rent-seeking, it noted, adding, "GST is expected to minimise multiplicity of taxes and tax cascading, especially in view of the seamless flow of credit".
Despite faster growth, transport and logistics sector is burdened with high logistics cost of 13-14 per cent value of goods.
In other developed or developing economies, these costs stand at 6-8 per cent of the value of goods.
In a direct cost comparison with China, India's average cost to export or import one container is around 72 per cent higher, in higher transit time. The overall tax on the supply of indigenous goods is around 29.37 per cent.
"With the implementation of GST, the Revenue Neutral Rate will be much lower than the present tax rates on goods. This will lead to a lower tax burden for consumers, thereby facilitating a consumption-led growth," it said.
