A PROJECT ON

IMPACT OF GOODS AND SERVICES

TAX ON INDIAN ECONOMY –
LOGISTIC SECTOR

SUBMITTED BY: PARVEEN

D’SOUZA SAP ID: 77118679939

NMIMS GLOBAL ACCESS SCHOOL

FOR CONTINUING EDUCATION

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 DECLARATION

I, PARVEEN D’SOUZA, of NMIMS Global Access School for Continuing Education,

from PGDFM semester 4, hereby declare that I have completed this project on “Impact

of Goods and Services Tax on Indian Economy – Logistic Sector” in the academic year

2019-2020. The information provided is true and original to the best of my knowledge.

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 ACKNOWLEDGEMENT

I would take this opportunity to express my deep sense of appreciation and regards

towards all those who have directly and indirectly helped me in the successful

completion of this project.

I would like to express my sincere gratitude towards my project guidance professors and

mentors whose guidance and care helped me in understanding and fulfilling the

requirement for the project.

I am grateful to all my peers and my friends who have been a great support during the

project work.

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Table of Contents
Declaration.......................................................................................................................2

Acknowledgement............................................................................................................3

Objective of study............................................................................................................5

Executive Summary.........................................................................................................6

Introduction Of Indian Taxation...................................................................................8

Introduction Of Goods And Service Tax (Gst) In India............................................14

Objectives and Salient Features Of Indian GST System...........................................16

Impact of GST on Indian Economy.............................................................................26

Overview of Indian Logistics Industry........................................................................30

GST Impact On Logistic Sector...................................................................................35

Literature Review..........................................................................................................48

Research Methodology..................................................................................................49

Data Analysis..................................................................................................................49

Findings...........................................................................................................................50

Key Suggestions..............................................................................................................58

Conclusion......................................................................................................................59

Bibliography...................................................................................................................60

Annexure 1 – Survey.....................................................................................................61

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OBJECTIVE OF STUDY
 To provide information of evolution of tax system in India.

 To understand various components of Goods and Services Tax (GST).

 To study the need and importance of the Goods and Service Tax to the Indian economy.

 To understand how GST has impacted the Indian economy with specialisation in logistic sector.

 To evaluate the challenges and changes faced by logistic companies due to implementation of GST.

SCOPE OF THE STUDY

 The paper provides a detailed overview about how the situation was before implementation of GST
and after implementation of GST.

 The scope of the study is to analyse whether GST has a negative or positive impact on logistic sector.

 The paper provides information of the impact of logistics sector in the Indian economy.

 It provides a detailed information on the components in logistics and its effect due to
implementation of GST.

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EXECUTIVE SUMMARY

The introduction of GST in India is a historic reform. The GST Act bill was passed by the Rajya Sabha
on 6 August 2016 and was passed by the Lok Sabha on 8 August 2016. The act was implemented on 1
July 2017. GST is a comprehensive, destination-based and multi-stage tax charged on each value
addition. It is a destination based tax on consumption of goods and services. It is proposed to be levied
at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages
available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by
the final consumer.

The roll out of GST has been a landmark achievement of the Government with respect to unifying
multiple central and state taxes barring a few goods or sectors and availability of Input Tax Credit
(ITC) across the entire value chain. Multiplicity of tax rates has been eliminated to a large extent. The
objective to roll out a single IT based interface for taxpayers has also been achieved to some extent.

However, more than 26 months down the line and after multiple policy updates, it seems that not
everything has unfolded as planned. This was, however, a possibility and the Government was
prepared to incur short-term losses in exchange for large future gains. GST in India not only boasts one
of the highest tax rates but also consists of the largest number of tax slabs. Add to this the growing
compliance burdens, technical as well as compliance issues. Government has raised GST collection
target to Rs.
1.10 crore per month from December 2019 onwards to ensure revenue collection as per targets, of
course without harassing the genuine taxpayers. GST officers shall ensure that GSTR-1 and 3B returns
are filed for which penalties / fines have been waived in recent GSTC meeting. Fearing coercive action
and waived fine, taxpayers may come forwarded and file returns by 10th January, 2019, as stipulated
as a waiver condition. The present GST cannot be termed as a perfect GST as it does not include all
products and services, there are barriers in input tax credit and GST rates are every now and then
distorted.

The logistics sector broadly comprises the road transport sector (consisting of unorganized small
businesses, trucking, fleets and large transport companies), the storage and warehousing sector and
finally third-party logistics (3PL). These can be further classified into big and small players and asset
heavy/light companies. Strong growth supported by government reforms, transportation sector
development plans, growing retail sales, and the e-commerce sector are likely to be the key drivers of
the logistics industry in India. Online freight platforms and aggregators are on the rise in the Indian
logistics market, given the need for low entry barriers and less capital investment compared to setting
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up of an asset-based business model. A nuanced communications campaign is crucial to convey the

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various aspects of the new system of GST amongst businesses, consumers and key intermediaries,
such as tax practitioners, as well as amongst the tax administration itself and the political class.
Manufacturing in India holds the potential to contribute up to 25%–30% of the GDP by 2025 which
will drive the growth of the warehousing segment in India. The logistics market in India is forecasted
to grow at a CAGR of 10.5% between 2019 and 2025.

For manufacturers, the goods and services tax (GST) has now replaced the multiple state VATs and the
need to have a hub across all states will cease to exist. This will allow firms to redesign supply chains
and centralize hub operations to take advantage of scale economies. It will also allow firms to employ
efficient practices such as bulk-breaking and cross-docking from a central location. Already, Nagpur,
India’s “zero-mile city", is looking to become the “nation’s warehouse" and is witnessing increased
investment from retailers and warehouse companies betting on GST transforming the nation’s logistics
space. Under GST, the tax on warehouse, storage and other labour services has increased from 15% to
18%. So a third-party logistics provider will now have more incentive to move towards the provision
of services that have a high degree of value addition and where input tax credit can be claimed. This
can result in consolidation in the storage and warehouse sector.

For transport services, the “reverse charge mechanism" can be levied as before but the taxpayer will
not be able to claim input tax credit, as the main input cost is fuel which is outside the purview of GST.
This may work to the advantage of small/medium transporters who may be unable to comply with tax
filings every 20 days. But this can have an impact on businesses hiring the services of transporters and
in case of service charge, being liable to pay taxes, cannot claim the input tax credit. So, there is bound
to be some friction in negotiation and payment for transport services and a disruption in the industry as
big players might exit pure transportation business and get into more value-added services.

The logistics sector is being touted as one of the main beneficiaries of the new GST regime. Initially,
there is bound to be an increase in compliance and adjustment costs as the frequency of filing returns
will increase and the input tax credit will require compliance of each and every player in the entire
value chain. This will result in uncertainties and affect the profitability of the sector in the short run. In
the long run, operational efficiency is bound to improve. And while GST won’t solve many intrinsic
problems of India’s transport network, it could reduce the logistics costs of companies producing non-
bulk goods by as much as 20%. The impact and overall cost benefits of GST will additionally vary
widely across industries.

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INTRODUCTION OF INDIAN TAXATION
Every country is governed by a government who is responsible for maintaining law and order and
ensuring the citizens are able to attain a basic minimum standard of living. In a country like India,
there exist wide disparity of income among the rich and the poor. It is the duty of the government to
implement a system that would help in lowering such disparity in the society at large. Therefore, in
order to achieve this, the government establishes a taxation and subsidy system.

During ancient times, taxes in India were levied on different professionals such as actors, doctors,
singers etc. and it dates back to 1860 when Income Tax Act was formally introduced by James Wilson,
the Finance Minister of British India. The most important reform in Income Tax law came in 1922
when the 1919 Chelmsford Reforms were implemented. According to these reforms, distinction was
introduced between the functions and resources of the State and Central Government. As per this act,
the tax revenues became the primary source of Government’s revenue. After India got independence,
Direct Taxes Administration Enquiry Committee was set up in 1958. On the basis of the
recommendation of the Law Commission and the Enquiry Committee, Income Tax Act, 1961 came
into existence with effect from 1st April 1962.

MEANING AND NATURE OF TAXES

Taxes refer to a kind of financial charge that is imposed on an individual or a company by the
Government of India or state governments or any other recognised local body. The taxation system of
a country is important for the successful working of the overall economy. The purpose of collecting
taxes is to construct a pool of money that can be used to fund various public expenditures such as
providing subsidies, carrying out developmental activities etc. in other words, the government charges
taxes in order to accomplish its economic and social objectives to reduce economic disparity.

India has a three tier tax structure which is the central government, state government and local
municipal bodies that are allowed to levy and collect taxes as per Article 265 of the constitution. There
are various types of financial charges (taxes and cesses) such as sales tax, income tax, Value Added
Tax (VAT), excise duty, customs duty etc. all these taxes are classified in two categories i.e. Direct tax
and indirect tax.

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 Department of
Economic Affaires
Central Board of
Direct Taxes
(CBDT)
Government of Ministry of Department of
India Finance Revenue
Central Board of
Customs and
Excise (CBEC)
Department of
Expenditure

Fig 1: Hierarchy of Bodies Related to Taxation

OBJECTIVES OF TAXATION

 All government expenses are funded by the taxes collected from the general public and corporate
houses.
 Preventing the concentration of wealth in a few hands by charging tax at a higher rate on a
progressive tax system. This prevents wealth being concentrated in a few hands.
 The government manages the economy by providing concessions and rebates to stakeholders. It
also imposes taxes to save domestic industries such as increase import duties to discourage
imports.
 There are incentives provided in the tax regime for entrepreneurs and companies that establish
facilities and offices in remote or underdeveloped areas.
 When companies set up facilities and industries in remote places, it tends to boost the economic
activities in those areas which in turn leads to the development of those areas.

TAX STRUCTURE IN INDIA

The tax structure has undergone lot of changes in the past few years. All the taxes which are the
liability of an assessee (taxpayer) come under the category of direct tax. On the contrary, all the taxes
which an assessee can recover from other person but the liability of payment of which lies with
him/her are called indirect taxes. The Central Government levies income tax, Central GST and customs
duty. The state governments have the right to levy taxes such as State GST.

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 Old Tax Structure

Indirect
Direct Tax
Tax

Income Wealth Tax

Tax (Now Central Tax State Tax
Abolished)

Service VAT/Sales Miscellaneous

Excise Custom
Tax /CST Tax (Entry Tax,
Luxury Tax,
Lottery Tax
etc.)

Fig 2: Old Tax Structure of India

Direct Tax
A type of tax where the impact and the incidence fall under the same category can be defined as a
Direct Tax. The tax is paid directly by the organisation or an individual to the entity that has imposed
the payment. The tax must be paid directly to the government and cannot be paid to anyone else. Some
of the important direct taxes imposed in India are as follows:

 Income Tax
 Corporate Tax
 Property Tax
 Capital Gains Tax
 Wealth Tax
 Estate Tax
 Gift Tax

Indirect Tax
It refers to a group of tax laws and regulations. It is levied on various business activities including
manufacturing, trading, imports and exports, stamp duty, registration, transfer etc. it is levied by both
state and central governments. Some of the important indirect taxes imposed in India are as follows:

 Sales Tax

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  Service Tax
 Central Excise Tax
 Additional Excise Duties
 Surcharges
 Luxury Tax
 Special Additional Duty of Customs (SAD)
 Entry Tax

New Tax Structure

Direct Tax Indirect Tax

Income Tax Wealth Tax

(Now Abolished) Intra-State Inter-State

CGST (Central SGST (State

Government) Government) IGST (Central
Government)

Fig 3: New Tax Structure of India

GST IN OTHER COUNTRIES

France was the first country to implement the GST in 1954, and since then an estimated 160 countries
have adopted this tax system in some form or another. Some of the countries with a GST include
Canada, Vietnam, Australia, Singapore, United Kingdom, Monaco, Spain, Italy, Nigeria, Brazil, South
Korea, and India.

France

 The rates are charged in the slab of 2.1%, 5.5%, 10% and 20%, out of which 20% is the standard
rate.

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 A taxable person that begins business activity in France must notify the French VAT authorities
and register for VAT within 15 days. Special rules apply to foreign or “no established” businesses.
 The businesses are administered by French Ministry of Finance Registration requires completing
Form IMP (EU persons) or Form M0 (non-EU persons) and the form’s appendix describing the
activity to be performed in France.

Singapore

 GST was initiated in Singapore in 1994 with the flat GST rate of 3% which was lowest in the
market. With effect from 2007, the GST rate has been increased to 7%.
 All registered businesses must file GST returns electronically. GST-registered businesses are not
required to submit any other documents when the GST return is filed. However, GST-registered
businesses are required to maintain records for a period of five years.
 A GST-registered business has to file GST tax returns and account for GST to the Internal Revenue
and Tax Authority of Singapore (IRAS).

New Zealand

 GST in New Zealand was introduced in 1986 at a rate of 10%. The rates were changed twice –
12.5% in 1989 and 15% in 2010 in a move to mobilize higher revenue while removing distortions
in the tax structure.
 Registration online is done instantly, whereas registration by way of a hard copy form can take
several weeks. The registration can be submitted either by the taxpayer or by an agent of the
taxpayer.
 GST returns are generally submitted monthly or bimonthly. A registered person whose taxable
turnover exceeds NZD24 million in a 12-month period must submit GST returns monthly. It is
administered by Inland Revenue.

Canada

 Canada’s federal government imposes a 5% sales tax known as the Goods and Services Tax (GST)
which was introduced in 1991. When a supply is made in a “participating province,” the tax rate
includes an additional provincial component of 8% or 10%, depending on the province. The
combined 13% or 15% tax is known as the Harmonized Sales Tax (HST).
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 Persons required to register under the legislation must apply to the Canada Revenue Agency within
30 days following the first taxable supply made in Canada.
 Every person who carries on business or any commercial activity is required to maintain records
and books of account for GST/HST audit purposes. The records must generally be kept in French
or English at the person’s place of business in Canada. (Worldwide VAT, GST and Sales Tax
Guide, 2019)

Fig 4: Source GST Edge – Countries with GST

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INTRODUCTION OF GOODS AND SERVICE TAX (GST) IN INDIA

Goods and Services Tax (GST) is an exhaustive indirect tax that is levied on the production, sales and
consumption of sales and services throughout India. It has replaced other taxes levied by the centre and
state government. GST is an integral indirect tax which was implemented in India from 1st July, 2017
and it was introduced as 101st Constitutional Amendment Act (122nd Amendment Bill) which was
enforced from 1st July, 2017. It is a single uniform tax which has eliminated and absorbed multiple
taxes under the previous indirect tax regime that included Value Added Tax (VAT), Service Tax,
Excise Duty, Central Sales Tax, Entry Tax etc. Implementation of GST is the significant taxation
reform in India which emerged with a mission of “One Nation One Tax” in the year 2017.

Introduction of GST lead to uniformity tax laws across all states, spanning across different industries.
The idea was to divide the taxes between central and state governments on the basis on pre-approved
and predefined formula. Additionally, it simplified the process of offering goods and services
uniformly across India because of no additional taxes from states.

Due to various disagreements between multiple states, the GST roll out missed several deadlines.
Below shows the timeline.

Table 1: GST Timeline

Year Event
2000 Committee was set up to draft the GST Law
2005 Kelkar Committee recommends to roll out GST by 12th Finance Commission
GST proposed in the Parliament by the then Finance Minister and set a
2006
deadline of 1st April, 2010 to implement it
The then finance minister presents a basic structure for GST and retains
2009
deadline
2010 Computerisation of commercial taxes in states
2011 Constitution Amendment bill for GTS was presented in Lok Sabha
2012 New deadline (31st December, 2012)was set up by the then Finance Minister
In the budget speech, the then Finance Minister announced as a
2014
compensation of INR 9000 crores for states
December 2014 The Finance Minister introduces the bill in the Lok Sabha
February 2016 New deadline is set up of 1st April 2016
January 2017 New deadline to roll out GST is set up as 1st July 2017
March 2017 Four key bills (CGST, SGST, IGST and UTGST) are passed in both houses
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 May 2017 Four slab rates i.e. 5%, 12%, 18% and 28% are unveiled by the GST council
1st July 2017 GST rolled out

COMPONENTS OF GST
GST is applicable on all goods and services, manufactured or supplied inside India, however there are
three products which are exempted from GST i.e. alcohol for human consumption, petroleum products
and electricity. The components of GST are as follows:

 Central Goods and Services Tax (CGST)

As per the CGST Act 2016, CGST is the part of GST and it has absorbed various taxes that were
collected by the Central Government, such as CST, Central Excise Duty, Service Tax, Additional
Customs Duty, Education Cess, Surcharges, etc. CGST is applicable when transaction is done within
state boundaries or at the intrastate level.

 State Goods and Services Tax (SGST)

SGST is collected by the state government and it has absorbed various taxes that were collected by
state governments such as VAT, state sales tax, Octroi and entry tax, luxury tax, taxes on lotter, taxes
on betting and gambling etc. Like CGST, SGST is applicable when transaction is done within state
boundaries or at intrastate level.

 Integrated Goods and Services Tax (IGST)

IGST is collected by Central Government and it is applicable when commodities or services move
within two or more states. In other words, IGST is applicable on interstate transaction.

 Union territory Goods and Services Tax (UTGST)

UTGST is collected by both central and UT Administrative bodies in the ratio of 1:1. It is applicable
when transaction is done within the union territories. IGST is applicable in the case of inter UT
transfer and UT state transfer.

UTGST is applicable in Daman and Diu, Dadra and Nagar Haveli, Andaman and Nicobar,
Lakshadweep and Chandigarh. However, it is not applicable in Pondicherry and Delhi, as they have
their own legislative assembly and chief ministers.

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GST has been designed as a one comprehensive, destination-based taxation concept. It aims to
streamline the process for tax levy, collection and monitoring and overcome the cascading effect of
taxation. There may be also revenue gain for the Centre and states due to widening of the tax base,
increase in trade volumes and improved tax compliance.

Here are the most prominent differences between the VAT structure and GST:
S.No. Particulars Old VAT/ Indirect Tax System GST Model
Based on Origin or value Destination based tax on
1. Nature of Tax
addition final consumption
Central Excise Additional Duty Central Goods and
2. Central Taxes Subsumed
of Customs Service Tax Services Tax (CGST)
VAT Purchase Tax
State Goods and Services
Entertainment Tax Luxury Tax
3. State Taxes Subsumed Tax (SGST)
Lottery Taxes State Cess and
Surcharge Entry Tax
Basic custom duty Additional
Basic Customs Duty
4. Custom Duties Replaced Duty of Customs Special
(BCD) - IGST
Additional Duty of Customs Cess
Integrated Goods and
Excise Duty Central Sales Tax
5. Inter State Taxes Services Tax (IGST)
Service Tax

Central Goods and

Excise Duty State VAT Service Services Tax (CGST)
6. Intra State Taxes Replaced
Tax and State Goods and
Services Tax (SGST)
Tax is levied on manufacture,
Supply of Goods and
7. Taxation event sale/completion of provision of
Services
services

OBJECTIVES AND SALIENT FEATURES OF INDIAN GST SYSTEM

 To Eliminate the Cascading Effect: Cascading effect means when is the tax on tax levied on a
product at every step of the sale until it is sold to the final consumer. GST would be levied only to
the net value added on the product, not to the whole value of the product.
 Uniform tax structure: Before the GST the tax rate is different for the different parts of the
Country on different goods and services. Before GST People come to Delhi and used to buy
electronics from Delhi because the tax rate on electronics in Delhi is less than in other states in
India. Now, tax is the same in every state.

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 Ease of doing business: After GST, the problems in indirect tax have been reduced. Earlier firms
faced many problems for registration of excise customs, VAT, dealing with tax authorities, etc.
The benefits of GST have helped companies to carry out their business with ease.
 Regulation of unorganized sector: In India, there is a lot of Sector which still Unorganized. The
government tries to put those firms into the main streamline. This business can be a bakery in your
locality or maybe a small factory. Now, these firms/factories/business also paying GST which
increases the revenue of the Indian Government.
 Increase in revenue: GST increases the revenues of the central government and state
governments. Tax Evasion is very hard so every firm needs to pay taxes(GST). The false claim is
very less due to it as this requires matching of invoices between the recipient and the suppliers.
 Online procedure: The entire process under the GST regime starting from registration to return
filling is online. Filling the GST is easier than the old Tax because we fill only one return under
GST and before GST we need to fill return to every tax to tax departments.
 Product competitiveness: GST is meeting the India Tax system with international tax standards.
After GST the production cost will decrease as there is no more Cascading effect in the tax system.
So, Indian product costs will be low and products can more competitive in the global market.

GST Identification Number refers to the unique identification number allotted to every business.

GSTIN is a state-wise, PAN-based 15-digit identification number. (GST Basics)

Fig 5: Source GST Edge – Format of GSTIN

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MANDATE OF GST COUNCIL
As per Article 279A of the amended Constitution, the President shall, within sixty days from the date
of commencement of the Constitution (One Hundred and First Amendment) Act, 2016, by order,
constitute a Council to be called the Goods and Services Tax Council. (About Us, n.d.)

1. The Goods and Services Tax Council shall consist of the following members, namely: —
a) the Union Finance Minister (Chairperson);
b) the Union Minister of State in charge of Revenue or Finance (Member);
c) the Minister in charge of Finance or Taxation or any other Minister nominated by each State
Government (Members).

2. The Members of the Goods and Services Tax Council referred to in sub-clause (c) of clause (2)
shall, as soon as may be, choose one amongst themselves to be the Vice-Chairperson of the
Council for such period as they may decide.

3. The Goods and Services Tax Council shall make recommendations to the Union and the States on—
a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may
be subsumed in the goods and services tax;
b) the goods and services that may be subjected to, or exempted from the goods and services tax;
c) model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services
Tax levied on supplies in the course of inter-State trade or commerce under article 269A and
the principles that govern the place of supply;
d) the threshold limit of turnover below which goods and services may be exempted from goods
and services tax;
e) the rates including floor rates with bands of goods and services tax;
f) any special rate or rates for a specified period, to raise additional resources during any natural
calamity or disaster;
g) special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir,
Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and
Uttarakhand; and
h) any other matter relating to the goods and services tax, as the Council may decide.

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4. The Goods and Services Tax Council shall recommend the date on which the goods and services
tax be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol),
natural gas and aviation turbine fuel.

5. While discharging the functions conferred by this article, the Goods and Services Tax Council
shall be guided by the need for a harmonized structure of goods and services tax and for the
development of a harmonized national market for goods and services.

6. One-half of the total number of Members of the Goods and Services Tax Council shall constitute
the quorum at its meetings.

7. The Goods and Services Tax Council shall determine the procedure in the performance of its
functions.

8. Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of
not less than three-fourths of the weighted votes of the members present and voting, in accordance
with the following principles, namely: —
a) the vote of the Central Government shall have a weightage of one third of the total votes cast,
and
b) the votes of all the State Governments taken together shall have a weightage of two-thirds of
the total votes cast, in that meeting.

9. No act or proceedings of the Goods and Services Tax Council shall be invalid merely by reason of—
a) any vacancy in, or any defect in, the constitution of the Council; or
b) any defect in the appointment of a person as a Member of the Council; or
c) any procedural irregularity of the Council not affecting the merits of the case.

10. The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute —
a) between the Government of India and one or more States; or
b) between the Government of India and any State or States on one side and one or more other
States on the other side; or
c) between two or more States, arising out of the recommendations of the Council or
implementation thereof.

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ADVANTAGES OF GST

 GST has replaced 17 indirect taxes and eliminated compliance costs. Levies and state restrictions
had made e-commerce complicated. A few sellers did not even ship to some states. It is being
estimated that over 2-3 years, there can be seen 80 basis point rise in GDP.

 Suppliers are encouraged to pay tax because of input tax credit as a result tax evasion is reduced. A
dual oversight is available for state and central governments. There has been a decline in various
tax- exempt goods.

 Full input tax credit would mean a drop of 12-14% in the capital goods. Input tax credit is not
available for various capital goods under GST. This leads to a 6% increase in investment in capital
goods.

 GST eliminates the cascading effect of tax, logistics costs, interstate tax and unified market. As a
result, manufacturing us expected to become more competitive. GST offers apt countervailing duty
and therefore, there is increased protection from imports. Manufactured goods have become
cheaper with lower tax and other costs.

 The earlier 2% interstate taxes meant production used to be kept within states. Under the national
market of GST, it is possible to disperse it and create opportunities for others. There is uniformity
in markets as the past fragmented market across state lines has now been unified with major drops
in costs.

DISADVANTAGES OF GST

 Business after implementing GST have to update the accounting system or ERP to GST complaint
or purchase a GST software which increases their cost. Employees also have to be trained to use
the software as well as have a clear understanding of the tax.

 The SME’s who had not yet adopted to GST had to immediately grasp the GST regime so they can
issue GST invoices and be compliant to the digital record keeping and file timely returns.

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 GST will mean an increase in the operational cost as businesses ow have to employ tax
professional to be GST compliant. This will be challenging for small business.

 Businesses are turning from pen and paper to online filling and payment of taxes which are
difficult for small scale business to implement. Cloud based GST software is a solution as the
software can upload the invoices and the software will populate the return forms automatically
with the information available in the invoice.

 Especially small business which are in the manufacturing sector have to face difficulties under
GST regime. Earlier business which a turnover of more than Rs.1.5 crore had to pay for excise
duty but under GST, a business is taxable if the turnover exceeds Rs.20 lakhs. However, SME’s
that have turnover up to Rs.75 lakhs can opt for composition scheme and pay only 1% tax but can’t
opt for input tax credit (ITC)

TAX RATES UNDER GST

The GST Council meeting is conducted regularly in order to further improve the overall GST rates for
multiple goods. Various states and industries support a decrease in GST tax rate for different items
which are taken into the discussion in the council meetings. The government recently wanted to
change the GST rates and wanted to keep them as per the original rates but the changes in the customer
preference and other factors led to different decisions.

Therefore, after the final revaluation of the commodities of the basic consumers, it was found that most
of the products must be in the necessities categories instead of the luxury category. Below are revised
rates as per financial year 2020-21: (Kumawat, 2020)

Rates Commodities / Services

Milk, Butter Milk, Curd, Cereals, Natural Honey, Flour, Besan, Puffed rice,
Papad, Bread, Prasad, Salt, Bindi. Sindoor, Contraceptives, Fresh Fruits and
0% Vegetables, Firewood, Bangles (non-precious metals), Agricultural Implements,
Judicial Papers, Printed Books, Newspapers, Bangles, Human Blood, Guar meal,
Plates and cups made of flowers, leaves and bark, Dried Tamarind, etc.
0.25% Semi-precious Stones-cut & Polished
1.50% Diamond Job work
Face Masks, Namkeen/Bhujiya, Coffee, Tea, Kerosene, Coal, Cream, Skimmed
Milk Powder, Branded Paneer, Frozen Vegetables, Processed Spices, Pizza Bread,
5%
Rusk, Sabudana, Medicines, Stent, Lifeboats, Soyabean, Groundnut, Sunflower
Seeds, Vegetable Fats & Oils, Beet Sugar, Cane Sugar, Cocoa Beans, Shells,

22
 Paste, Tar, Peat, Lignite, Lpg, Bakery Mixes, Doughs, Pizza Bread, Vermicelli,
All Ores And Concentrates, Table or Kitchen or Other Household Articles of
Copper, Copper Utensils, etc.
Dry Fruits In Packaged Form, Ayurvedic Medicines (Branded), Butter, Cheese,
Ghee, Fruits And Vegetable Juices, Tooth Powder, Coloring Books, Picture
12% Books, feature phones, Umbrella, Sewing Machine, Milk Beverages, Bio-Gas,
Medicinal Grade Hydrogen Peroxide, Anaesthetics, Potassium Iodate, Iodine,
Steam, Glands And Other Organs For Organo-Therapeutic Uses etc.
Handwash Sanitizer, Preserved Vegetables, Tissues, Envelopes, Tampons, Note
Books, Cornflakes, Pastries And Cakes, Jams, Jellies, Sauces, Soups, Ice Cream,
Instant Food Mixes, Steel Products, Camera, Smartphones, Infant Use
18% Preparations, Petroleum Jelly, Paraffin Wax, Petroleum Coke, Petroleum
Bitumen, Nicotine Polacrilex Gum, Essential Oils, Hair Oil, Toilet Paper,
Notebooks, Helmets, Headgears, Copper Bars, Rods, Wires, Copper Screws,
Nuts, Bolts, Nickel Bars, Rods, Nickel Screw etc.
Automobiles, Motorcycles, Molasses, Chocolate Not Containing Cocoa, Aerated
Water, Dishwasher, Atm, Vending Machines, Aircraft For Personal Use, Yachts,
28% Powder, Chocolates, Instant, Aroma Coffee, Coffee Concentrates, Custard
Powder, Protein Concentrates, Sugar Syrups, Aerated Water (With Sugar),
Artists’etc.
28% (with cess) Luxury and De-Merits Goods, Caffeinated Beverages + 12% Cess

GST PROCESS
GST Registration
According to GST rules, it is mandatory for a business that has a turnover of above Rs.40 lakhs to
register as a normal taxable entity. This is referred to as the GST registration process. The turnover is
Rs.10 lakhs for businesses that are present in hill states and North-Eastern states. The registration
process can be completed within 6 working days. GST registration can be easily done on the online
GST portal. Business owners can fill a form on the GST portal and submit the necessary documents for
registration. It is mandatory for certain businesses to complete the GST registration process. It is a
criminal offense to carry out operations without registering for GST and heavy penalties are levied for
non-registration.

Exemption from registration

Certain entities are exempt from registration. These bodies don’t need to register. The following get a
Unique Identity Number (UIN) instead of GSTIN (GST Basics):

23
 Any specialized agency of United Nations Organization, or any financial institution and
organization notified under the United Nations Act, 1947.

 Embassies or Consulates of foreign nations.

 Other person/s notified by the Board/Commissioner.

 Any specific person/s notified by the Central or State governments, based on recommendation of
the GST Council.

GST Calculation

Calculating the amount that needs to be paid as GST when filing your returns can be quite tedious. A
number of aspects and factors must be taken into consideration, such as ITC, exempted supplies,
reverse charge, etc. Failure to pay the entire GST amount can see you slapped with an 18% interest on
the shortfall, thereby making it necessary to ensure that you pay the right amount towards GST.

Here is an example showing how you can calculate your GST liability:

Particulars Amount

Overall value of interstate sales Rs.20 lakh

Overall value of intrastate sales Rs.25 lakh

Advance received Rs.8 lakh

SGST Rs.25 lakh x 9% = Rs.2.25 lakh

CGST Rs.25 lakh x 9% = Rs.2.25 lakh

Rs.20 lakh x 18% = Rs.3.6 lakh Rs.8 lakh x

IGST
18% = Rs.1.44 lakh Total = Rs.5.04 lakh

Types of GST Returns

There are 11 types of GST returns drafted for different category of taxpayers and business units (Types
of GST Returns, 2020):

24
 Return form Who should file the return and what The due date for filing returns
should be filed?
GSTR-1 The registered taxable supplier should 11th of the subsequent month for
file details of outward supplies of more than 1.5 Crores (Turnover)
taxable goods and services as affected. & Last Day of the Succeeding
month for turnover up to 1.5
Crores
GSTR-2 The registered taxable recipient should 15th of the subsequent month.
file details of inward supplies of taxable
goods and services claiming the input
tax credit (Currently Filing facility
of
GSTR-2 is not available on the portal)
GSTR-3B The registered taxable person should 20th of the subsequent month.
file the monthly return on the basis of
finalization of Summarized details of
outward supplies & inward supplies
plus
the payment of an amount of tax.
GSTR-4 (CMP 08) Composition supplier should file the 18th of the month succeeding
quarterly return for depositing payment. quarter.
GSTR-5 Return for the non-resident taxable 20th of the subsequent month
foreign taxpayer.
GSTR-5A Return for the OIDAR 20th of the subsequent month
GSTR-6 Return for input service distributor 13th of the subsequent month
GSTR-7 Return for authorities carrying out tax 10th of the subsequent month
deduction at source.
GSTR-8 E-commerce operator or tax collector 10th of the subsequent month
should file details of supplies effected
and the amount of tax collected
GSTR-9 The registered regular taxpayer should 31st December of the next fiscal
file an annual return year
GSTR-9A The composition traders should file an 31st December of the next fiscal
annual return year
GSTR-9C Turnover Above 2 crores (Regular 31st December of the next fiscal
Taxpayers) in a Particular FY year
GSTR-10 The taxable person whose registration Within 3 months of the date of
has been cancelled or surrendered cancellation or date of
should file the final return cancellation order, whichever is
later.
GSTR-11 The person having UIN claiming the 28th of the month, following the
refund should file details of inward month for which the statement
supplies was filed.

25
Usually, the Input Tax Credit should be reduced from Outward Tax Liability to calculate the total GST
payment to be made. TDS/TCS will be reduced from the total GST to arrive at the net payable figure.
Interest & late fees (if any) will be added to arrive at the final amount. Also, ITC cannot be claimed on
interest and late fees. Both Interest and late fees are required to be paid in cash. The way the
calculation is to be done is different for different types of dealers – regular dealer and composition
dealer.

Fig 6: Source Cleartax – GST payment process

GST COLLECTION IN INDIA AS FY 2019-20

For the full financial year 2019-20, GST from domestic transactions has shown a growth rate of 8 per
cent over the revenues in the preceding year. During 2019-20, GST from import on goods fell by 8 per
cent as compared to the previous year. Overall, gross GST revenues grew at 4 per cent year-on-year.
Goods and Services Tax (GST) mop-up in March recorded an 8.4 per cent decline over March 2019
collection of Rs.1.06 lakh crore (PTI, 2020). The collections were lower on account of dip in revenues
from domestic transactions as well as imports.

Of the total ₹97,597 crores, central GST stood at ₹19,183 crores, state GST at ₹25,601 crores,
integrated GST is ₹44,508 crores, which included ₹18,056 crores collected on imports and
compensation cess is
₹8,306 crores, which included ₹841 crore collected on imports, the revenue department said in a
statement on Wednesday.

The total number of GSTR-3B Returns filed for the month of February up to 31 March, 2020 is 7.65
million. Here's a chart that shows trends in monthly gross GST revenues during the current year.
(Finance, 2020)

26
 Fig 7: Source GST Council – GST Collection

IMPACT OF GST ON INDIAN ECONOMY

Goods and Services Tax (GST) is extremely useful for the economy of India for a long term basis. The
reason for the benefit of the Good and Services Tax (GST) is due to the uniformity of taxes. It merges
all the indirect taxes which was prevailing in India during the Value Added Tax (VAT).

Goods and Services Tax (GST) helps the business sector to grow and to become strong by bringing
transparency. When the business sector will flourish it will help in creating further employment which
will ultimately lead to reducing the burden of the tax.

Goods and Services Tax (GST) have a consistent scheme of the tax for the goods and services across
India, i.e. 0%, 5%, 12%, 18%, and 28%. The tax rate of some goods or products is different from the
rest such a gold, precious stones and semi-precious stones. Special rates of taxes are levied in such
products. Things such as luxury cars, tobacco, carbonated beverages, etc., are subjected to 22% of the
additional cess.

Goods and Services Tax (GST) in comparison to the previous indirect laws relating to the taxes
provided a broader base for the taxes. The Central Excise Law exempts the small scale units i.e. SSI
having a turnover up to Rs. 1.5 crore from levy the duty. Exemption under the service tax law was
given when the previous financial year has accumulated turnover up to Rs. 10 lakh. The lower limit for

27
the purpose

28
of levying the Value Added Tax (VAT) varies from one state to another state i.e. between Rs. 5 lakh to
Rs. 20 lakh.

But in the Goods and Services Tax (GST) scheme, the lower limit for the purpose of levying the
Goods and Services Tax (GST) was set or settled at Rs. 20 lakh. But in some circumstances i.e. for
special category States, the lower limit is fixed at Rs. 10 lakh. Goods and Services Tax (GST) had
included within it all the small suppliers. It was observed that many suppliers had registered
themselves intentionally and freely so that they may avail all the benefits relating to the input tax
credit.

Micro, Small and Medium Enterprises (MSME’s) has suffered some sort of complications with the
new tax regime i.e. Goods and Services Tax (GST). All the Micro, Small, and Medium Enterprises
(MSME’s) are suffering problems to conduct their business as there is a requirement of registration in
every state from where the MSMEs are formulating a supply. Goods and Services Tax (GST) is
helping the Micro, Small and Medium Enterprises (MSME’s) in developing the ability for the purpose
of maintaining the account book. Maintenance of the account book will ultimately help the enterpriser
to get a loan from any bank or financial institution. This will help them to increase their business. They
will now borrow the money from the formal sector and will no longer rely on the informal sector for
obtaining the loan. The country like India really demands a strong Micro, Small and Medium
Enterprises (MSME’s) which helps in creating more employment.

Fig 8: Source Economic Times – World Economic Projections (%)

Goods and Services Tax (GST) helps in controlling the tax evasion. Permanent Account Number (PAN)

29
which is issued by the income tax department is linked with the Goods and Services Tax (GST) number

30
i.e. GSTN. This helped in establishing a relationship between indirect taxes and direct taxes. This
ultimately aid or support in reducing the evasion of tax to an enormous extent. During the regime prior
to the Goods and Services Tax (GST), there were many cases of tax evasion. When the taxpayers
disclose their turnover under the indirect tax law and the direct tax law both differed from each other,
which gives a path to the evasion of tax.

After the implementation of the Goods and Services Tax (GST), there is an expectation of an increase
in the tax Gross Domestic Product (GDP) ratio. The expectation is that the basis points (bps) will
increase up to thirty in the financial year of 2018-2019 each and 2019-2020. This was stated by the
table of medium-term expenditure framework (MTEF) in the lower house i.e. Lok Sabha. The
databases of the indirect tax and the direct tax are linked together, it helps the data analytical tools to
remove all the inconsistency and also helps the authorities of revenue to take a mandatory action.

Summing up the whole, an increase in the ratio of Gross Domestic Product (GDP) will overall helps in
lowering the rate of tax in India. Goods and Services Tax (GST) will help the Indian economy on a
long term basis.

IMPACT OF GST ON VARIOUS SECTORS

Fast Moving Consumer Goods (FMCG)
The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess
of US$ 13.1 billion. Distribution cost of the FMCG sector was amounting to 2-7% of total cost prior to
GST, which dropped to 1.5% after implementation of GST (GST Analysis and Opinions , 2020). Basic
food products such as milk, rice, wheat and fresh vegetables have been kept under the NIL and
products such as paneer branded and sold like mother dairy paneer or Nestle Paneer and Frozen
vegetables have been kept under the 5% bracket. It is expected that the reduction in cost and taxes
would make the consumer goods cheaper.

Pharma and Healthcare

India is the largest producer for generics and the country’s Pharmaceutical Industry is currently the 3rd
largest in the world in terms of volume and ranks 14th in terms of value. Goods and Service Tax is
having a constructive impact on the Indian Pharmaceutical Industries as it has increased the
manufacturing cost. Most drugs mentioned in 5% tax bracket under GST were previously covered in
4% tax bracket under VAT. It will eliminate the cascading effect of multiple taxes applied on One
Product.
31
Under GST, Ayurvedic medicines could get costlier as they would be taxed at the rate of 12% which
were earlier covered by 4% tax bracket under VAT regime. Because of this hike in the tax rates, MRP
has to be revised to absorb overall effect (Agarwal, 2019)

Aviation Sector
The GST rate applicable for flight tickets on economy class is 5% while business class fares attract a
GST rate of 12%. In contrast, the service tax rates applicable under the erstwhile service tax regime
were 6% and 9% respectively (Impact of GST – Aviation , 2018). The introduction of GST law has
increased the compliance cost applicable to the airline company. Airlines are required to register in
every state in which they provide service and are presently still grappling with aligning the global
distribution systems to keep up with the evolving law. To smoothen the process, the government has
provided numerous favourable measures such as exempting GST on inter-state movement of aircrafts,
reduced rate for lease premiums. Requirement to reverse ITC, added cost of inputs due to ATF kept
outside the ambit of GST is posing considerable hardships on the industry.

Media and Entertainment Sector

The media and entertainment (M&E) industry in India has outperformed expectations, and is amongst
the fastest growing sectors. One of the major changes has been the subsuming of Entertainment Tax
under GST. Earlier, prior to GST, the rate of Entertainment Tax for the film industry varied from state
to state, ranging from 15% to 110% (India’s media and entertainment sector, 2019). Introduction of
GST has stabilised the rate variance and provides a uniform market across the nation. A GST of 18% is
levied on movie tickets up to 100 INR, and 28% on movie tickets costing more than 100 INR. The
uniform rate across the nation prevents the arbitrage. Further, the prices of DTH and cable services
came down after the implementation of GST. However, sporting events such as IPL attract a 28% GST
levy, which makes them costly.

Infrastructure Sector
Implementation of GST has brought in predictability and efficiency in the administration of indirect
taxes for this sector. In the pre-GST era, a majority of construction contracts, being work contracts,
were subject to a combination of both service tax (4.5%) and VAT (1-15%) depending upon the state.
Moreover, there were several construction activities, such as the construction of roads, dams, irrigation,

32
that were exempt from service tax. However, such activities were subjected to VAT. Under the GST
law, the rate prescribed for taxing works contracts is 18%. The cascading effect of indirect taxes has
been reduced for contractors and suppliers. However, for project owners, there is an increase in cost
with input tax credit restrictions coupled with the withdrawal of tax exemptions (Singhania, 2018).
Electricity being outside the ambit of GST, increase in the rate of tax on services and withdrawal of
exemptions for power projects has had an adverse impact. The infrastructure sector should now expect
to enter into a compliant tax regime, though clarity is still required on certain conceptual points.

Real Estate Industry

GST has brought transparency and maturity in the real estate sector. In the previous GST regime,
developers had to pay a lot of indirect taxes that makes the houses costly for buyers. Under GST
regime, changes have been made and all the various taxes have been subsumed by a single tax rate. At
the time of GST implementation on real estate in July 2017, the industry as a whole was witnessing a
slump attributed mainly to demonetization and RERA (Real Estate Regulation and Development Act,
2016) implementation. For the Under Construction properties, 12% GST is applicable. Houses
purchased under CLSS (Credit- Linked Subsidy Scheme) attracts 8% GST (Dhawan, 2018). Ready-to-
move-in properties are kept out of GST. All of these changes will impact the real estate positively only
if there is proper implementation of various rules and regulations.

OVERVIEW OF INDIAN LOGISTICS INDUSTRY

Logistics is considered to be the backbone of manufacturing and trading activities in the economy. It
has a critical role to play for developing countries like India wherein consumption is growing and
demand is always high. We can fairly assume that a well-organized and mature logistics industry has
the potential to leapfrog the “Make in India” initiative of the Government of India to its desired
position. In simple words, logistics can be considered as the movement of goods from its point of
origin to the point of consumption. A well planned logistics and supply chain ensures delivery of right
items in right quantities at the right time to the right place for the right price in the right condition to
the right customer. And if not well managed, everything goes for a toss. The stakes remain high for
both consumer and supplier.

The Logistics sector in India has today become an area of priority. One prime reason for the same
stems from the reason that years of high growth in the Indian economy have resulted in a significant
rise in the volume of freight traffic moved. The large volume of traffic has provided for growth
33
opportunities in all

34
facets of logistics including transportation, warehousing, freight forwarding, express cargo delivery,
container services, shipping services etc. The growth path also suggests that increase demand is being
placed on the sector to provide the solutions required for supporting future growth. Strength of the
logistic sector is likely to be one of the key determinants of the pace of the future growth of the
economy.

India's GDP is expected to reach 3.02 trillion in 2020, representing about 4% of the global GDP.
Strong growth supported by government reforms, transportation sector development plans, growing
retail sales, and the e-commerce sector are likely to be the key drivers of the logistics industry in India.
Online freight platforms and aggregators are on the rise in the Indian logistics market, given the need
for low entry barriers and less capital investment compared to setting up of an asset-based business
model. Manufacturing in India holds the potential to contribute up to 25%-30% of the GDP by 2025
which will drive the growth of the warehousing segment in India.

According to the Economic study 2017-2018, the Indian Logistics Courses in Kerala Industry, worth
around $160 billion has developed at a compounded yearly development rate (CAGR) of 7.8 cent
during last five years. The part provided work to in excess of 22 million individuals.

Increasing investments and trade points toward a healthy outlook for the Indian freight sector. Port
capacity is expected to grow at a CAGR of 5% to 6% by 2022, thereby, adding a capacity of 275 to
325 MT. Indian Railways aims to increase its freight traffic from 1.1 billion tons in 2017 to 3.3 billion
tons in 2030. Freight traffic on airports in India has the potential to reach 17 million tonnes by FY40.
Lack of supporting infrastructure, automated material handling systems, and high manual process
interference are some key areas where the Indian air cargo industry lags its global peers. Grant of
infrastructure status to logistics, the introduction of the E-Way Bill, and GST implementation are set to
streamline the logistics sector in India. Setting up of a logistics division under the Department of
Commerce, technology upgrades, and development of dedicated freight corridors and logistics parks
are also major moves to upgrade the logistics landscape.

Logistics start-ups in India gained a substantial foothold after the onset of e-commerce, and there are
several new companies that are gaining traction in the industry. Online platforms have increased
competition and lowered freight costs with real-time data availability and a transparent value chain. It
is imperative for logistics service providers to innovate and adapt to the transforming logistics
landscape.

35
Logistics cost is 13% of Indi’s GDP in comparison to 11% in Europe and 9% in the U.S. There is no
doubt that in India, an increasing demand is being placed on the logistics sector to provide solutions
which are required to support future growth.

While the growth in GDP created by logistics improvements is important, even more important is the
quality of that growth and the employment and income it creates, especially for the most economically
vulnerable segments of the population. World Bank research in Latin America showed that reducing
the share of logistics costs in the final price of goods by 14% can increase demand for those goods by
8– 18% and increase employment in that sector by 2.5%– 16%. Such an impact is particularly
important for micro small and medium enterprises7, which employ over 110 million Indian citizens8.
Specifically, for agricultural products, another critical sector of the Indian economy, the same
reduction in logistics costs to 14% of final prices increased demand by 12% and increased agricultural
employment by 6%— boosting both rural incomes and nutrition and food security for the entire
country.

Existing challenges in Present-day Logistics Industry in India

The Indian logistics sector is neatly divided into two key segments: freight and passenger
transportation, and warehousing and cold-storage. A blend of the inbound and outbound services
sourced by manufacturing and supply chains, it is a vast playing field that has till date, mostly failed to
deliver as per its potential, primarily due to infrastructural mismanagement.

Unevenly distributed infrastructure leads to under-utilization of key resources while unnecessarily

burdening the other components. A glaring disconnect between transport networks, software and
equipment and warehouse facilities further fuels more disorganization in this industry, leading to
volumes of largely preventable waste.

36
However, these are not the only challenges that plague the Indian logistics industry. Some of the other
obstacles in this respect are:

 Vague and unregulated pricing policies and unrestrained costs (over twice or thrice as high as
the global standards)
 Differential regulations brought about by multifarious local, regional and national authorities
leading to a state of no consensus, which ultimately weakens the spine of the logistics network
running through the nation as a whole
 Lack of trained personnel and adequate software/tools at various levels that ultimately results
in poor management and decision-making.
 Flaky assessment of transportation costs that leads to corruption on the part of the agents in
control, and a total lack of awareness on the part of the recipients involved.
 Lack of integration in transport networks, poor warehousing and distribution facilities and
information technology were the major challenges for businesses dealing in the logistics
industry.
 Stock damage and bad debts ensuing from delayed/improper delivery of goods
 Lack of research and development conducted in this space that renders most information out of
the reach of a large number of players, thereby, making the market very uncertain and
indeterminable.

Despite various challenges and its peculiarities, the logistics industry in India is transforming by
developing innovative business models, outsourcing their supply chain operations to 3PL services
providers and by removing the structural and policy-based stringencies.

37
How is the Road Ahead?
Let us look at some of the prominent challenges in this sector and their probable solutions.

Current Scenario Probable / Implemented Solutions

Indian trucking industry is highly fragmented, The fragmented trucking industry in the country
unorganized and lack communication. has to be shoved with logistics management
application and mobile apps to make the
management platform simpler and easier for your
drivers, your clients and for internal management.
Features such as GPS / GPRS tracking,
Multilingual features in driver app (include local
language), Truck maintenance alerts (engine,
brakes, parts health check), etc would handle the
major loopholes in management.
Long queues of goods-laden trucks waiting The introduction of e-way bill has made toll
outside state boundaries often led to delays in booths unnecessary. Cutting this delay short can
delivering the cargo. help the economy save around Rs. 2,300 crore
which used to be lost due to goods trucks waiting
at state borders with their cargo. Implementation
of e-way bill enabled logistics software
would ensure
efficient operation.
The performances of Indian Ports have been Ports should provide emphasis on improving
generally deteriorating over the past few superstructure by expansions of associated backup
years. The cargo evacuation facilities are container stack areas, transfer bays, rail transfer
under great strain. facilities for seamless rail evacuation, gate
terminals for proper road evacuations. Smaller
new ports should be constructed at regular
intervals
along the coast.
Air freight volumes will continue to rise in Dedicated terminals or private bonded facilities
2018 fueled by trade agreements and for air cargo should be set up at all metropolitan
expansion of industrial activities, putting airports. New air ports that are dedicated only to
further upward pressure on rates and cargo flights are viable options.
requirement of improved infrastructure.

38
GST IMPACT ON LOGISTIC SECTOR
The radical shift in the country’s taxation policy admittedly has some indisputable benefits to offer.
Some of these have been described below:

 Increased efficiency in inter-state transportation of good at reduced costs – GST impact is most
likely to be felt in this area, by reducing lengthy clearance processes and complex paperwork at
numerous inter-state points to a thing of the past. This automatically means drastic cut in travel
time as well as
39
 sizeable cost-cutting in logistics by almost 30-40%, as estimated by a World Bank report. Amping
up on the speed and reduction of expenses of goods’ movement in turn means a great boost to the
GDP by approximately 100-200 bps and opening up of numerous commercial opportunities, as per
industry experts. On this front, expansion and improvement of road connectivity seems paramount,
and so does timely and hassle-free movement of trucks. Fortunately, the government has already
taken assertive measures in furtherance of the same. The changes have come about in the way of an
increase in budget allocation by almost Rs. 6,924 crores in FY2017-18 and promise of seamless
connectivity with ports and railways, thus, making even the interiors of the country accessible. Post
GST, numerous check posts at more than 20 state borders have already been dismantled, thus
enabling trucks to cover more ground. Additionally, the E-way bill (backed by the National
Informatics Centre and to be generated from GST-Network portal) mandating online registration of
goods exceeding Rs. 50,000/- prior to their movement across borders, is due to be incorporated this
October.

 Even without all of these changes having been implemented, the shift in taxation policy seems to
have already borne fruits in a time shorter than the same was anticipated in – that is, in July, a
document prepared by the road transport ministry cited an increase in distance covered by trucks
by almost 30% post-GST. And though it might be too soon to assess GST’s efficacy in its entirety,
it cannot be denied that it has done wonders by removing compliance, infrastructure and time
laches from the way.

 Overhaul of the Supply Chain Management via consolidation of warehouses – A lesser discussed
effect of the GST, and yet, the logistics industry would stand nowhere without organized, robust
warehouses. With the implementation of the reformed tax structure, sweeping changes are
expected to seep through this segment, with companies vying for overall operational efficiency
than mere tax efficiency. With GST having rolled out, companies will now find the global hub-
and-spoke model for freight movement much more feasible. This means fewer warehouse centres
in strategic locations instead of smaller ones scattered in each and every state; in turn, leading to
less time wasted at multiple points, less paperwork and faster movement of goods, not to mention,
a central regulation percolating down to the many distributors via the secondary despatch model.

 With freight times coming down by 30-40%, a leaner supply chain management with proper
utilisation of vehicles and overall efficiency is promised. And with tax considerations out of the
way,

40
 what remains is a lot of decision-making to be handled, albeit, only on the operational level of
logistics management. This ultimately translates to better services for the end consumer.
Encouraged by the many possibilities and relaxations offered by GST, some warehouse operators
and e- commerce players have already begun considering Nagpur as a warehousing hub (owing to
its status as the zero-mile city in India), in a bid to ramp up their logistics efficiency. The collective
reaction at the implementation of GST has not remained confined to companies overhauling their
warehouse management alone; it has gone on to rightly getting identified as a lucrative business
prospect by players in this niche – who do not just see warehouses as storage counters anymore,
but as centres that can be milked for a bunch of other services (packaging, bar coding, etc.) in a bid
to provide more sophisticated services to the consumers. If Canada Pension Plan Investment
Board’s recent $500 million joint venture with India’s Indo Space or Singapore’s Ascendas-
Singbridge’s $600 million deal with Bengaluru’s Firstspace Realty is anything to go by, then we
ought to acknowledge the potential of this segment booming into a veritable business model on its
own, as domestic and foreign investments flow in.

 Entry of new stakeholders while boosting the presence of existing participants in the logistics
market – Who would have thought online truck booking would ever be a thing? This interestingly
has shaped up as a shining reality though, given the country’s massive daily domestic consumption
and its formidably huge road network (approximately 4.7 million km) pitted against the countless
transportation challenges faced by logistics firms and their carrying agents (such as truckers,
shippers) alike.

However, with internet and modern technology making inroads into this sector as well, online truck
booking has developed into an enviable convenience business truly cannot afford to overlook. The
contribution of the road infrastructure cannot be overlooked, with this segment reportedly contributing
about 5% to the country’s GDP. And with GST positively impacting other commercial industries and
businesses in the country, the resulting changes are expected to benefit the road transport industry
significantly, typically owing to a rise in demand. With growth in this sector projected at 6.1% in real
terms in 2017 and a Compounded Annual Growth Rate (CAGR) of 5.9% through 2021, it would be
fair to assume that the online trucking industry would stand to gain immensely from this trickle-down
effect. While on a discussion on the impact of GST in this regard, it would be unwise to miss out on
the edgy benefits the Third Party Logistics Providers (3PLs) stand to gain from the reformed tax-
rollout. As a viable alternative to handling complex logistics by companies in a standalone

41
manner, 3PLs spell

42
massive potential in that they can provide streamlined warehousing services to slotted clients from key
distribution points; the only criteria they need to step up on to fully take advantage of this lush
commercial space are integration of logistics-friendly warehouse points and reshuffling of assets.

Bringing in transparency in logistics activities, thereby reducing overall corruption – By eliminating

the roots of parallel economy (and resultantly, black money), the GST move is expected to act as a
formidable deterrent to across-the-border corruption and monopoly of local booking agents, by
allowing broader scope for fair play which benefits all parties involved – businesses, consumers, states
and the Centre.

Comparison between pre and post GST scenarios

S.No Particulars Post GST Under GST
1. Registration Centralized registration (Service All the delivery hubs/pick up
Tax) with respect to PAN India centres to be registered by the
Contracts. company supplying service
(contracting party).
2. Contracting with Contracts entered on a PAN India Contracts on a PAN India basis
sellers basis. to continue (Invoice to be from
each registration?
3. Billing and Invoices issued under a Invoicing from each location
invoicing- for centralised system from where the service/goods is
logistics registered place supplied.
where the service is supplied.
4. Payment of taxes All the services were subject to Services are subject to CGST,
service tax at the rate of 15% SGST, IGST or UTGST
depending on the location of the
contractual recipient.
5. Increased Central A service provider is not eligible The taxes paid is available as
Value Added Tax to avail credit of VAT/CST paid credit depending.
(CENVAT) Credit on the procurement of capital
on account of capital goods.
goods
6. Entry tax Entry tax is a tax levied on entry Not Entry tax
of goods (as specified) into the
local area for consumption, use
or sale,
same is a cost.

43
 7. VAT/CST on inputs VAT/CST charges on the local/ While there are minimal input
procured at the interstate input procurements are procurement in the delivery
delivery hubs not eligible as credit under pre hubs, the taxes on such
GST regime. procurement would no more be
a cost in the system.
8. Increased CENVAT A service provider is not eligible The taxes paid would be
Credit – rent a cab
to avail credit of ST paid on rent a available as credit.
cab
services.
9. Increased CENVAT A service provider is not eligible Under GST, such cess is no
Credit – Swachh to avail credit of Swachh Bharat more be levied.
Bharat cess cess.

Let us consider the example of a manufacturing company in Chennai, which moves its goods to New
Delhi. The actual sale happens in New Delhi and the finished goods have to be transported from
Chennai to New Delhi across different states. As per the old taxation norms, one has to pay Central
Sales Tax (CST) when moving a good to another state and selling it in the other state. However, if the
good is moved for stocking and not for sale, then CST need not be paid. So many companies in order
to avoid paying CST, they show this movement as moving to stock and not moving to sell. To do this,
companies have warehouses in every state where the finish goods are stored and then the goods are
transported for sale from the warehouse in each state.

Let us consider another example of a city called Hosur in Tamil Nadu which is approximately 30km
from Bangalore. Shipping the goods from Bangalore warehouse to Hosur requires the company to pay
CST as Hosur in Tamil Nadu and Bangalore is in Karnataka. So, the companies ship goods from
Chennai warehouse, which is approximately 250km to Hosur to avoid CST. With the implementation
of GST, the companies will be free to setup their own warehouses to optimize cost and improve
customer service.

Illustrated with an example of how calculation under both the systems of GST and VAT are done:

Tax Taxable Tax Total

Particulars Tax Rate
Applicable Value Calculated Amount
Tax Implications under VAT
Price of manufactured Excise Duty 12.5% 10,000 1,250 11,250
goods
Sale of goods VAT 14.5% 11,250 1,631 12,881
Total Amount Payable 2,881 12,881

44
Tax Implications under GST
Consumption of goods CGST 9% 10,000 900 10,900
Consumption of goods SGST 9% 10,000 900 10,900
Total Amount Payable 1,800 11,800

45
Segmentation of Logistic Companies
The Indian logistic sector is primarily categorized into four segments comprising transportation,
warehousing, freight forwarding and value-added logistics

 Transportation
 Warehousing
 Value Added Logistic
 Freight Forwarding

The transportation which contributes maximum to the whole pie of logistic sector comprises carious
means such as road, rail, air and water. India being emerging country with prime dependency upon
transportation through land i.e. Through road and rail together which contributes about 60% followed
by warehousing 24.5 % comprising industrial and agricultural storage.

Modes of Transport
Rail and road mode of logistics is for the domestic trade. Road is the dominant mode of transport
which accounts for 68% of freight movement in India. Trucks are the most widely used mode of
transportation in India. At present, around 1.5 million trucks operate on the Indian roads and the
number of trucks increases around 10% a year. Railways are considered a relatively cheaper mode of
transport and are used mainly for transporting bulk materials over long distances. About 89% of its
freight traffic is contributed by major commodities such as coal, fertilizers, cement, petroleum
products, food grain, finished steel, iron ore and raw material to steel plants. The balance 11% is other
commodities moving in bulk and containers. Air and water mode of logistics is mainly for foreign
trade, and Ninety percent of foreign trade happens through water in India.

 Rail and waterways: Historically suitable only for long distance haul of large, regular flows of
low value density goods between fixed origin/ destination points with less fragmentation.
Modern intermodal services are increasing the ability of these modes ability to compete with
trucks for low-medium value shipments.

 Road: Offers greater flexibility in terms of final destination and volume of goods to be
transported but has higher per tonne-mile cost as compared to rail or water.

46
  Air: Suitable for goods with very short turn-around time but is has very high cost and pollution
intensity.

Fig 9: Source MastersIndia – Indian Transportation Sector (2019)

Impact of GST Rates on Road

In terms of Notification no. 12/2017-Central Tax (Rate) dated 28.06.2017 (sr.no.18), the following
services are exempt from GST (51 GST Flyer Chapter 38, 2018)

Services by way of transportation of goods (Heading 9965):

(a) by road except the services of:

(i) a goods transportation agency;

(ii) a courier agency;

As per Section 65B (26) of the Finance Act, 1994; “Goods Transport Agency (GTA) means any person
who provides service in relation to transport of goods by road and issues consignment note, by
whatever name called”.

Not all transport of goods by road is by a GTA. To qualify as services of GTA, the GTA should be
necessarily issuing a consignment note. Only services provided by a GTA are taxable under GST.
Services of transportation of goods by a person other than GTA are exempt. Moreover, in cases where
the service of GTA is availed by the specified categories of persons in the taxable territory, the

47
recipients

48
who avail such services are the ones liable to pay GST and not the supplier of services unless the GTA
opts for collecting and paying taxes @ 12% (6% CGST + 6% SGST). In all other cases where GTA
service is availed by persons other than those specified, the GTA service supplier is the person liable to
pay GST. The GTA service suppliers not entitled to take ITC on input services availed by him if tax is
being charged @ 5% (2.5% CGST + 2.5% SGST). In case the GTA service supplier hires any means
of transport to provide his output service, no GST is payable on such inputs.

Fig 10: Source ClearTax – Pre and Post GST

Example 1- Goods transportation intra-state

XYZ, a goods transportation company based in Karnataka, is hired by Akash Electronics registered in
Karnataka to transport 50 tv sets.
Supply of service: Transporting goods
Place of supply: Karnataka (the location of registered person)
GST: CGST+ SGST (intra-state)

Example 2- Goods transportation inter-state

XYZ, a goods transportation company based in Karnataka, is hired by Vinay Garments (registered in
Maharashtra) to transport 200 saris from Bangalore to Mumbai.
Supply of service: Transporting goods
Place of supply: Maharashtra (the location of registered person)
GST: IGST (inter-state)

Example 3- Goods transportation by unregistered person

Mr. Sharma (in Bangalore) is transferring his car by rail freight to Mumbai. He puts up the car in
Bangalore station.
Supply of service: Transporting goods
Place of supply: Karnataka (Location at which such goods are handed over for their transportation)
GST: CGST+SGST (Indian railways have a pan-India presence and are registered in all states)

49
Consignment note and eWay bill are two key documents involved in the transportation of goods.

The consignment note is a document issued by a GTA (goods transportation agency) in lieu of a
receipt of goods for transporting goods by road. Once a consignment note is issued, the lien of goods is
transferred to the transporter i.e. the responsibility of goods remains with the transporter till the
consignment is delivered to the consignee. No extra charges need to be paid for generating a
consignment note which is generated by the transporter. However, the document will contain details of
who is paying the GST on transportation and goods included in the consignment. Below is a sample
consignment note:

Fig 11: Source TaxGuru – Consignment Note

An eWay Bill is to be generated before goods are transported. This document has to be generated on
the official eWay Bill Portal and is a key document for ensuring compliance with GST rules. The e-
Way bill is a mandatory requirement for all GST registered individuals and businesses involved in the
transport of goods by road from one location to another (whether within transportation occurs within
the same state or interstate). Details included in the eway bill include GST paid on goods being
transported, name of consignee and consignor as well as details of vehicle being used to transport the
goods. Know more about generating and utility of e-Way Bill.

50
 Fig 12: Source GST Council – e-Way Bill

Impact of GST Rates on Rail Transport

The Indian Railways is the 4th largest railway network and the 8th largest employer in the world. In
2015-16, the Indian Railways carried more than 22 million passengers per day and 1.101 billion tonnes
of freight annually.

The railway sector was afraid of GST hitting freight loading in a bad way. Railway freight was lagging
behind road transport in spite of railway transportation not being subject to multiple stoppages at
checkpoints. Businesses have always preferred to transport goods through trucks to avoid the various
compliances and paperwork involved when transporting freight via railways.

Transport of goods and passengers by rail will attract 5% tax under GST. Although it seems more than
the previous service tax of 4.5%, the effective GST liability will go down thanks to the mechanism of
input tax credit which is now available on rail transport (FAQ_TransportandLogistics, 2019). Business
to Business (B2B) supplies will stand to gain with GST as input tax credit will be available. The
invoice matching concept will be applicable here as well in order to claim ITC. The IRTC will
capture the

51
GSTIN of all the business sending goods for transportation for which it will require changes to the
IRTC software.

This will be exceptionally beneficial to the railways as there is no ITC available on transportation
through Goods Transport Agencies (such as trucks). GST rate is also 5% on road transport thus
making the rail freight more competitive.

GST will be collected by Indian Railways and deposited with the government. IRTC will maintain a
consolidated summary of invoices for the freight of unregistered persons each day with details of all
B2C supplies.

Fig 13: Source ClearTax – Pre and Post GST

GST will benefit the logistics sector including railways by removing the need for businesses to
maintain multiple warehouses across states to avoid CST levy and state entry taxes. Transport service
rate of GST at 5 per cent will be anti-inflationary and give a much-needed boost to rail freight.
Reduction in cost of transportation of goods will lead to reduced prices.

Impact of GST on transport of goods by air

The GST rate for air transport service of goods is 18% (IGST 18% or CGST 9% plus SGST 9%). Air
transport of goods from a place out of India up to customs station of clearance in India is exempt from
GST.

In case of CIF (Cost, Insurance and Freight) contracts entered into by Indian exporter, the outward air
freight is paid by Indian exporter to Indian airline company. In that case, the place of supply of service
is the location of recipient of service (i.e. Indian exporter), as per section 12(8)(a) of IGST Act. In that
case, the Indian airline company in India was liable to pay tax @18% (IGST 18% or CGST 9% plus
SGST 9%) up to 25.01.2018.

52
Impact of GST on Shipping Charges
GST on freight depends if the transportation is national or international. If in case of a domestic
freight, transportation happens from a place in India to another place in the country. In this case, both
points of origin and destination have to be inside the country.

On international transportation, however, international freight rules are applied. This applies if both the
place of origin and destination are outside India, if one of them outside India, or both outside India.
Thus, this impacts the “Place of Supply” provision to determine the taxability of cross-border and
inter- state transactions. The tax should be charged on the total value of supply. If the transportation
cost is included, then GST has to be charged at the same rate of tax charged on supply.

For example: If the goods being supplied is charged at 18%, then you have to charge tax on transport
cost also at 18%. If you are not charging freight charges in the invoice and is directly paid by the buyer
of goods, then Goods Transportation Agency (GTA) provision has to comply.

The rate of GST on freight charges provided by the GTA is given below:

Transport Services GST

Rate
Transport of agricultural produce Nil
Transport of salt, milk, food grains including flour, rice and pulses Nil
Transport of magazines or newspapers registered with Registrar of Newspapers Nil
Transport of the relief materials for the victims of man-made or natural disasters, Nil
accidents, mishaps or calamities
Transport of organic manure Nil
Transport of any goods, where gross amount charged for the purpose of Nil
transportation
for the consignment transported in the single carriage doesn’t exceeds INR 1,500
Transport of military or defence equipment Nil
For transportation of goods other than the above 5%

Import pricing is of two types, viz., FOB (Free on board) or CIF (Cost, Insurance and Freight). For the
purpose of export, FOB Value is treated as Transaction Value. Under FOB pricing, the foreign
suppliers bear all the cost upto loading the goods into the vessel and the importer has to bear the cost
of freight.

In case of CIF (Cost, Insurance & Freight Value) expense is paid by a seller to cover the costs,
insurance, and freight of a buyer’s order while it is in transit.
53
The importer may engage either an Indian based shipping line or a foreign based shipping line and the
importer would be availing the services of such shipping line for ocean transport of the import goods.

Fig 13: Source Tax Guru – Ocean Freight paid by Importer

54
LITERATURE REVIEW

Garg (2014), analysed the impact of GST on Indian tax scenario. He tried to highlight the objectives of
the proposed GST plan along with the possible challenges and opportunity that GST brings. He
concluded that GST is the most logical step in Indian indirect tax reforms. Further he mentioned that
experts say that GST is likely to improve the tax collection and boost the economic development of the
country.

Kumar (2014), concluded that GST will help in eradicating economic distortion by current Indian tax
system and is expected to encourage unbiased tax structures which will be indifferent to geo locations.

Sehrawat & Dhanda (2015), conducted a study focused on advantages and challenges of GST faced by
India in execution. They concluded that a simplified and transparent tax system was the need of Indian
economy. Pointing out the various advantages they said that GST will provide India a world class tax
structure and a seamless tax system but it will depend upon effectiveness of its implementation.

Khurana & Sharma (2016), conducted a study with a view to explore various benefits and
opportunities of GST by throwing a light on its’ background, objectives of proposed GST plan and its
impact on Indian tax scenario. They concluded that GST implementation will definitely benefit
producers and consumers although its’ implementation requires concentrated efforts of all stake
holders especially central and state government.

Munde & chavan (2016), conducted a study to discuss the pros and cons of GST and accordingly make
suggestions to minimise loopholes and make it more effective. They concluded that if the probable
loopholes are dealt effectively, tax payers will accept the change brought upon and if procedures in
GST proves to be simple and assures the involvement of interest of all stakeholders then definitely it
will lead to economic development and rationalization of prices.

55
RESEARCH METHODOLOGY
The data used for the study comprises of primary and secondary data. The research type used is
exploratory research which gives thoughts and insights into the problem or study at hand. The primary
data was collected through questionnaire method as mentioned below with findings and suggestions. It
is confined to a minimal sample and may not reflect the opinion response of the entire population. The
result of the study is dependent on the survey as well as secondary data analysis. Considering the
current situation of lockdown due to COVID-19, collecting data was challenging. The study was
conducted with the basic assumption that the information provided by the respondents is factual and
true.

Secondary data is collected through various sources such as internet, e-books, newspaper articles,
government gazettes, journals etc. The procured data was analysed by a simple percentage method and
the results are supported with graphs and charts.

DATA ANALYSIS
The data was collected by administering a structured schedule of questions. The questions are formed
by 5 points like scale and answered by respondents in form of Strongly Agree, Agree, Neither Agree
nor disagree, disagree and strongly disagree. The data collected is presented in bar graph for better
analysis

The questionnaire is prepared to have a reality check of various issues being faced by the industry with
the transition to GST regime. Both MSME and large corporates have participated in the survey and
shared their first-hand experiences with GST since its implementation. 59% respondents to the survey
comprised of MSME firms whereas the rest 41% were large firms. Besides highlighting the key areas
of concerns, the respondents have also made useful suggestions to make GST simpler and effective.

The survey findings indicate that GST had a positive impact on the businesses' logistics. More than
60% respondents stated that their experience with respect to inter-state transportation of goods has
been good in terms of check-posts. More than 50% of respondents mentioned that goods vehicles are
no longer stopped and checked at state borders, and 59% respondents have cited reduction in
transportation time after GST has been implemented.

Amongst the key issues faced with respect to GST implementation, the industry has highlighted
glitches in GSTN portal, cumbersome procedures and documentation and cost of compliance as the
major areas of concern that need to be addressed.

56
FINDINGS
1. Has the implementation of GST been a positive impact on business?

Survey findings reveal that most respondents are happy with the implementation of this reform, with
76% respondents stating that GST has a positive impact on their businesses while 24% respondents
stated they didn’t have a positive impact.

24%

Yes No

76%

2. Is it convenient to use the GSTN portal for filing returns or uploading invoices?

59% of the respondents mentioned that they were not satisfied with the capability of the GSTN portal.

41%
Yes No
59%

3. Has the government been responsive to suggestions and queries of the industry?

The survey reveals that the government has been fairly responsive to suggestions and queries of the
industry, with 86% respondents stating that the government has taken adequate steps regarding change
in rates and providing clarity on various issues through rules, notifications, issuing FAQs and
guidelines.

57
 14%

Yes No

86%

4. What was impact on sales and profits of the products due to GST?

43% respondents to the survey stated that GST had positively impacted the demand for their goods and
services. While 40% stated that there was no impact on the demand, only 17% said that the tax had a
negative effect on the demand of their products.

17%

43% Positive
Negative
No Impact
40%

5. What has been the impact on pricing of the products due to GST?

63% of the respondents stated that the introduction of GST had impacted pricing positively, while the
remaining 37% stated otherwise.

58
 37%
Positive
Negative
63%

6. Which is an important factor for determining the price?

The survey shows that the pricing of participating enterprises in the survey has been impacted
primarily due to change in GST rate and change in Input Tax Credit, with 71% and 61% respondents
respectively stating the same.

38% Change in ITC

62% Change in GST rate

7. What has been the impact of GST on gross margins?

In terms of impact on margins, 55% of survey respondents mentioned that GST implementation has
impacted their gross margin negatively, while 45% said that their margins were impacted positively.

59
 37%
Positive
Negative
63%

8. What has been the impact on employment or hiring staff?

40% respondents stated that there was no impact on employment under GST. However, other 35%
respondents cited a positive impact on employment and 35% stated negative impact.

35%
40% Positive
Negative
No impact
25%

9. Has GST affected their choice of vendors or transporters?

62% respondents said that GST has affected their choice of vendors or transporters.

60
 18%

Yes No

82%

10. How has GST impacted the cost of supply chain?

In terms of changes in supply chain costs, 21% respondents said that there was a fall in their supply
chain cost under GST, while 45% said that there was no change. 34% respondents said that supply
chain costs had increased.

34%
45% Increased
Decreased
No change
21%

11. Which of the below is more convenient? E-way bill or Check Posts

96% respondents mentioned that as far as ease of doing business is concerned, e-way bill mechanism
in lieu of check-post is more effective

61
 4%

E-way Bill

Check Post
96%

12. How much as the transportation time been reduced under GST?

64% respondents to the survey cited a reduction of transportation time under the GST regime. Out of
the respondents who cited a reduction in transportation time, 56% respondents cited reduction by up to
10%, 25% respondents stated 10-20% and 19% stated a reduction in transportation time by 20-40%.

19%

Upto 10%
56% 10 to 20%
25%
20 to 40%

13. How has been the experience while interacting with GST authorities?

There was a mixed response with respect to respondents’ interaction with GST authorities. 29% of the
respondents stated that their experience of interaction with the GST authorities was positive, while an
equal number of respondents said that their experience was negative. 42% respondents said that they
were indifferent about their experience of interaction with the authorities.

62
 29%
41% Positive
Negative
No impact
30%

14. How long it took to obtain GST refunds?

70% respondents mentioned that it took more than 90 days from date of submission of application to
obtain GST refund; half of these respondents mentioned that it took more than 180 days. 18%
mentioned that it took 30-90 days while 12% stated that it took less than 12 days from the date of
submission to obtain the refund.

12%
35% Less than 30 days
18%
30 to 90 days

90 to180 days
35%
More than 180 days

15. Please highlight the key compliance issues as below:

The respondents were asked to highlight the key compliance issues they faced under the GST regime.
Issues with the GSTN portal remains on the top of concerns of businesses, with 68% of respondents
stating the same. 60% respondents mentioned cumbersome procedures and documentation as a key
issue, 36% mentioned cost of compliance and 28% mentioned lack of IT infrastructure as key issues.

63
 LACK OF IT INFRASTRUCTU 28%
RE

COST OF COMPLIAN 36%

CE

PROCEDURES & DOCUMENTATI 60%

ON

ISSUES WITH GSTN PORT 68%

AL

16. Some of the responses towards key issues:

Responses towards key issues (%)

Inter-state Transactions

Check-Post

Goods Classification

ITC for Exports

Suvidha Kednras

GST Returns

Supply Chain

0 10 20 30 40 50 60 70 80 90 100

Negative Positive

64
KEY SUGGESTIONS
 It has been observed GST Suvidha Kendras are not fully equipped to resolve issues. They should
be adequately trained to ensure that the GST Suvidha Kendras become an effective issue resolution
mechanism.
 ITC flow should be seamless and the recipient of goods/services should not be penalized for non-
payment of taxes by supplier.
 Clarifications given by Authorities for Advance Ruling (AAR) to be made easily available on
GSTN portal for easy reference.
 Refund under Budgetary Support Scheme should be allowed on a provisional basis with a CA
certificate in order to reduce working capital blockage.
 Shipping bill wise details are not available to assessee for refund received through bank due to
which assessees are facing issues in reconciliation. Necessary steps to resolve this issue must be
taken.
 Refund on units in fiscal benefit locations and exports with payment of IGST to be fast-tracked and
process for the same to be simplified.
 ITC should be allowed on all business expenses without any restrictions. ITC should be allowed on
the basis of scanned copy of invoice/documents.
 Refund Procedure including submission of documents should be made online.
 Converge the existing band of GST rates to fewer rates which would reduce complexity and
eventually lead to simplification.
 Remove original invoice reference against credit note/debit note. One credit/debit note should be
allowed to be issued against multiple original invoices.
 Rationalise rate under GST regime for goods falling under 28% rate category.
 Clarifications should be provided by the government regarding treatment of trade offers under the
GST regime.

65
CONCLUSION
Comparing the design of India’s GST system to similar taxes on value added across other countries,
the note highlights that India’s GST system is relatively more complex, with its high tax rates and a
larger number of tax rates, than in comparable systems in other countries. Key to success is a policy
design that minimizes compliance burden, with a single rate, limited exemptions, simple laws and
procedures, an appropriately structured and resourced administration, compliance strategies based on a
balanced mix of education and assistance programs and risk-based audit programs.

Businesses, especially exporters faced difficulty to claim refunds. The mismatch between shipping bill
date and tax invoice date does not allow initiating refund of IGST paid on exports. They have
suggested that this condition of matching shipping bill date and tax invoice should be waived off.
Firms which supply raw materials to its SEZs locations located in other states is liable to GST as such
a transfer is considered sales and is not getting a zero-rating benefit. Such transfers for captive
consumptions should not be charged under GST.

Most respondents also stated that there is a need for greater clarification from the Government on the
anti-profiteering provisions to ensure that they do not lead to undue harassment. Respondents
suggested that the government should release detailed guidelines and FAQs with examples to clear
away ambiguities.

Some respondents cited a positive impact on employment and mentioned that their demand for
workforce had increased mainly due to the extensive return filing process under GST, reconciliation of
inputs in the GST portal, e-way bill generation, etc. While GST opened up accountancy jobs,
respondents also said that as margins improved, it enabled companies to focus on operations,
encouraging improved recruitments in operations.

Out of the respondents citing a negative impact on gross margins, 58% respondents said that the key
reason for same was their inability to recover increased tax from the customer. The introduction of the
“e-way bill” may result in some fresh barriers to the free movement of goods in the form of road
inspections to verify the goods being transported.

While the Indian logistics industry was once considered to be a service provider, now it is classified as
an end to end solutions provider for multiple sectors of the industrial realm. Apart from improving
global rankings, it is safe to say that anticipating the Indian logistics industry to become the dominant
industry in the country.

66
BIBLIOGRAPHY

51 GST Flyer Chapter 38. (2018). Retrieved from Goods Transport Agency in GST.

About Us. (n.d.). Retrieved from Goods and Services Tax Council.

Agarwal, C. C. (2019). GST Impact on Indian Pharmaceutical Industry. Retrieved from saginfotech.

Dhawan, S. (2018). Economic Times. Pre-budget cheer for home buyers: 8% GST on houses under PMAY
effective today .

FAQ_TransportandLogistics. (2019). Retrieved from Central Board of Indirect Taxes and Customs (CBIC).

Finance, M. o. (2020). GST Revenue Collection. Retrieved from Press Information Bureau .

GST Analysis and Opinions . (2020). Retrieved from CLearTax.

GST Basics. (n.d.). Retrieved from GST Edge: https://blog.gstedge.com/gst-basics/

Impact of GST – Aviation . (2018). Retrieved from PWC.

India’s media and entertainment sector. (2019). Retrieved from PWC.

Kumawat, S. (2020). Revised GST Slabs in India for FY 2020-21. Revised GST Slab Rates in India FY 2020-21
Finalized by the GST Council.

PTI, P. T. (2020). GST Collection. GST collections in March dip below one lakh crore mark at Rs 97,597.

Singhania, K. (2018). Financial Express. GST impact on infrastructure: It will cut multiple taxes but will affect
cost of construction.

(2020). Types of GST Returns. CLearTax.

Worldwide VAT, GST and Sales Tax Guide. (2019). In E. &. Young.

67
ANNEXURE 1 – SURVEY
1. Has the implementation of GST been a positive impact on business?
o Yes
o No

2. Is it convenient to use the GSTN portal for filing returns or uploading invoices?
o Yes
o No

3. Has the government been responsive to suggestions and queries of the industry?
o Yes
o No

4. What was impact on sales and profits of the products due to GST?
o Positive
o Negative
o No impact

5. What has been the impact on pricing of the products due to GST?
o Positive
o Negative

6. Which is an important factor for determining the price from below?

o Change in (Input Tax Credit) ITC
o Change in GST rates

7. What has been the impact of GST on gross margins?

o Positive
o Negative

8. What has been the impact on employment or hiring staff?

o Positive
o Negative

68
 o No impact

9. Has GST affected the choice of vendors or transporters?

o Yes
o No

10. How has GST impacted the cost of supply chain?

o Yes
o No
o No change

11. Which of the below is more convenient? E-way bill or Check Posts
o E-way bill
o Check Posts

12. How much as the transportation time been reduced under GST?
o Up to 10%
o 10 to 20%
o 20 to 40%

13. How has been the experience while interacting with GST authorities?
o Positive
o Negative
o No impact

14. How long it took to obtain GST refunds?

o Less than 30 days
o 30 to 90 days
o 90 to 180 days
o More than 180 days

15. Please tick the key compliance issues faces as mentioned below:
GST Compliance Issues Yes No

69
 Issues with GSTN Portal
Cumbersome Procedures & Documentation
Cost of Compliance
Lack if IT Infrastructure

16. Some of the responses towards key issues:

GST Compliance Issues Positive Negative
Inter-state transactions
Check-Post
Goods classification
ITC for Exports
Suvidha Kendras
GST Returns
Supply chain

70