Potential impact of Implementation of GST in India

Goods and Services Tax (GST) regime in India will convert the country into unified market, replacing most indirect taxes like central excise, services tax and various local levies from April 1, 2017 in a single tax structure. This will help create a common market allowing free movement of goods and services across the country.

As with anything else in India which has a massive cross country impact it took upwards of a decade for the law to be formulated debated and approved in the countries parliament. If it was so essential why did it take so much time. though that is an independent topic altogether about the misfortunes of my poor country.

India's logistics sector accounts for nearly 14 per cent of the GDP, It could see massive savings to the tune of $200 billion annually on implementation of GST.

• With centralized taxation faster movement of goods and less idle hours for the trucks on the notorious Indian roads could be possible which would in turn support lower inventories for the same service levels across industries. Trucks in India at present cover 280 kms a day while in US it is about 800 kms.
• Delays at toll plazas and extra fuel consumption due to wait times result in annual loss of up to $ 15 Billion 
• Simpler documentation, should also help in less stoppage time 
• With shorter journey times damage and theft to goods are also expected to be reduced
• Some say it might even help in 'reducing' graft by the vile Indian bureaucracy and police though that's just day dreaming. Their ingenuity in making a buck is unparalleled. 

Today manufacturing and logistics/warehousing networks in India are mostly designed to navigate the myriad taxation laws across the continent sized land, with only a secondary thought to actual efficiency.

With GST companies will be able to invest in economies of scale to operate one large central warehouse, rather than having multiple warehouses. It is expected to give a massive boost to the entire Logistics and warehousing ecosystem with investments in equipment, system, vehicles, skilled manpower et all. Greater efficiency with better use of technology and cost advantages has the potential to save 30 to 50 per cent of the Logistics costs in the course of time.

The Indian Logistics 'potential'

In the emerging economies India has overtaken China as the market with the most logistics potential.
As documented in the article India continues to face immense problems like the GST Bill which a recalcitrant opposition continues to block with their unreasonable other political demands. The media doesn't find this news 'sexy' enough to shout hoarse about it and expose the criminal apathy of the political classes

Legislation of such bills is one such issues. Many other crippling issues will ensure that India's 'potential' will remain unchanged, since there will be no actual improvement, for years to come.

• Bad roads: While some road networks have improved in the past decade the overall state of the road infrastructure can only support an average truck speed of about 20 km/hr and the despicable condition of the ageing truck fleets allow them to be on the road for 20 days in a month (while the international avg is 25)
• Killer streets: the long hours, high stress and fatigue of the drivers who drive vehicles with an average age of , coupled with the horrible conditions of the Indian roads and perennially clogged traffic lead to in excess of 140,000 fatalities annually
• Venal officialdom: Survey data shows that bribes paid to Government officials and traffic police, amount to on an average of 15 per cent of total trip expenses. It is not only the expense, the delays caused due to constant stoppages and demands for money with time consuming pretexts of checking papers hurts the entire supply chain and negatively impacts the total costs of all the goods

The condition of the Indian Rail networks, which is a Govt monopoly, is a similar story beset with ineptitude and corrupt management. The utilization rates, travel times, average costs, losses etc all the parameters need a major re haul if this more efficient mode of transport is to be fully utilized to power the growing Indian economy

The current administration does understand the importance of Logistics networks for the Indian economy and has planned massive investments in the rail and road (75 B USD) and shipping sector (75 B USD) by 2019. 

Until then the Indian commuter and consumer will continue to pay a heavy price in terms of money, time and health.