The logistics sector is one of the most prominent players in the development of Indian economy. Today, Indian Logistic sector stands at an estimated worth of $194 Billion and is expected to witness an increment of $21 Billion in the next 2 years. Well, a huge credit can be given to GST (Goods & Services Tax) in India.
Before GST, things were very difficult for the logistic sector due to the complex web of 17 odd taxes. Earlier, all the states had a different taxation system. The businesses were bounded to pay these taxes which increased their overall expenditure. So, to sustain and function smoothly in the longer run, the companies were forced to establish warehouses in different states where they operate.
This incompetence of the taxation system had created issues at various levels. Some of them include:
The capital expenditure of business increases by establishing a warehouse needlessly at different parts of the country. Also, capital resources get locked-in which have a direct impact on the revenue of businesses, especially SMEs.
Impact on Business Expansion:
Opening a warehouse is a long and tedious process. It affects the overall costing of a business, and a lot of business expansions also gets delayed due to several complications involved in establishing a warehouse. Choosing the right place based on the connectivity, capacity, availability and more can take long. Proper planning and execution can delay other business expansion initiatives.
Compromise on Technology:
Grade A warehouses are installed with modern technology with automatic sorters, pick/pact automation, and more. This increases the efficiency and turnaround time of any business. However, with Grade C or Grade D warehouses, such infrastructure is not feasible.
Operational inefficiency at the warehouses:
Grade A and Grade B warehouses are equipped with the latest technologies. The businesses can store a wide range of products in these warehouses without the risk of deterioration. This helps the businesses to make optimal use of the warehouse and its space. However, this is not possible with of semi-utilized warehouses scattered around the country.
Cost of Transportation:
Freight carriage holds the biggest cost share of the logistic operations of every business. The cost of interstate transportation and taxes collected at the border of the states, collectively increase the overall expenditure of a business.
With the implementation of GST in India, things have changed for good. The Indian logistics and warehousing sector, which used to be a limited commodity earlier, is growing exceptionally with every passing year.