The Indian logistic industry is expected to grow steadily, led by e-commerce

penetration, economy revival, proposed GST implementation and government

initiatives like Make in India, National Integrated Logistic Policy, 100% FDI in
warehouses, food storage facilities, etc. Transportation alone holds 60% share of
the logistic industry and rest 40% is contributed by warehousing, freight
forwarding, value-added logistics, etc
The logistic sector in India remains entangled in several complexities which
primarily includes higher logistic costs and complex tax structure. The recent
implementation of Goods and Service Tax (GST) bill will trim the logistic costs
upto 20% from the current levels, however, the persisting high logistic costs
could only be resolved by development of logistics infrastructure
The Indian logistic sector is primarily categorized into four segments comprising
transportation, warehousing, freight forwarding and value-added logistics

Challenges faced:
Complex tax structure
Currently, each of Indias 29 states taxes goods that move across their borders at
various rates. As a result, freight that moves across the country is taxed multiple
times

Impact of GST on Third party Logistic service providers (3PL):

Due to the implementation of GST, the 3PLs would have to restructure its assets
and realign its operations in line with changes in the operations of its customers
in the new scenario. Earlier, 3PLs had warehouses located near major
distribution centers of its key clients (different industries) irrespective of its
geographic disadvantage mainly to avoid interstate taxes. However, post GST
implementation 3PLs are expected to build integrated warehouses at logistic
suitable locations. So accordingly, 3PLs would have to restructure the assets to
accommodate the long distance consignments which will occur with this scenario
of free movement of goods across the country.

Warehousing
Safexpress falls under the Industry/Retail warehousing segment. The GST regime
will witness the growth of the warehousing and logistics industry in India. New
warehousing hubs need to be established in order to facilitate better
transportations and logistics services across the nation. According to a real
estate consultancy firm JLL India, the implementation of GST is playing a key role
in the development of e-commerce giants and they will be able to choose wide
range of services across the country. It will undoubtedly benefit the logistics
corner and offer cost saving on the consumer end.
Under the new tax structure, the focus would shift from saving tax by having
smaller warehouses, to improving overall efficiency. The merger of smaller
warehouses will lead to higher efficiency in supply chains and the former would
become more productive and logical locations. Automation of these assets will be
seen, which will give excellent cost benefits to the operators. As the rents
charged by organized warehouses will go down, the price advantage that
unorganized warehouses presently enjoy will shrink

GST, will free the decisions on warehousing and distribution from tax
considerations and here the technology will play its role in the following cases
East tracking of consignments
Managing complete Hub and spoke model
Centralized accounting.
Effective system to manage warehouse because warehouses will be fewer but
larger.
Outsource the logistics operations.
This will result in more efficient cross-state transportation with improvement in
transit time. Reformation of paperwork for road transporters Cost efficiency to
optimum use of assets. This will lead to changes in Logistics Network
Redefinition. Logistics service providers to rethink their business operations.

Highlights: The implementation of GST will lead to lower transit time and thereby generate higher truck
utilisation.
This will boost demand for high tonnage trucks and lead to overall reduction in transportation costs.
It will facilitate seamless inter-state flow of goods, which is expected to directly accelerate demand for logistics
services.
Impact: The logistics sector is largely fragmented and comprises many unorganized players. Several players in
the unorganised sector avoid tax which generates a cost gap between them and the organized players.
With the GST coming into picture, we expect an overall positive impact, with a reduction in the cost
competitiveness as all the players will be brought under a uniform tax base, thereby improving growth
opportunities for the organized players.
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