The introduction of GST has primarily had a positive effect in the transport sector, as it has helped speed up the movement of consignments via road, rail, air and sea. The sector has witnessed a 20% increase in efficiency due to the dismantling of checkpoints and the addition of the e-way bill has also greatly helped reduce the burden on drivers from enduring the procedures at checkpoints.
Pre GST, each state had levied different tax rates on goods passing through. Post GST, the rates applicable were unilateral through the states, however, in cases of multimodal transport, the situation can be further improved by having one GST rate on all multimodal transport, which would help reduce the burden felt by both the manufacturer and the transporters.
Multimodal transport is the process of goods being transferred between locations using more than one method of transportation, such as road and rail. For example, the first step in multi-modal transport begins when the consignment leaves the warehouse by road and reaches its next transport destination either by rail, within the country or in cases of exports by air or sea. From here the final leg of the transport may go by road to reach the market for consumption. So, if a supplier is transferring goods, he/she does not have to own all the methods of transport. They can use an intermediary, known as a multimodal transporter, who takes up the responsibility of ensuring the goods are delivered utilizing more than one means of transport.
Since the implementation of GST, the government has committed to developing multi-modal logistics parks, such as the one undertaken in Varanasi, that will serve as a gateway connecting North to East with terminals for waterway, rail and road, with storage and warehouse facilities as well. As mentioned, GST has improved logistics furthered aided by the introduction of the e-way bill. However, as the industry is only just beginning to see the benefits, more can be done, especially for multimodal transportation.
The automotive industry, specifically, has requested for a single rate of GST as the present scenario applies various GST rates. By having one single rate, it would make for seamless transaction from the factory to end consumer. Moreover, in the present system, in cases of multimodal transport, the rules and various rates for the different modes of transport, allows for interpretation of various players such as consultants or tax experts, leading to confusion. The implementation of GST has organized this unorganized structure, which is in its next stage of becoming more organized by creating a more effective multimodal transportation, which will reduce logistics costs and improve imports and exports in the country, enabling global competitiveness.
Note: Multimodal transport of goods will be charged at the rate of 12% with full ITC under forward charge vide notification no. 13/2018- Central Tax dated 26.07.2018.
The implementation of GST in the transport sector has been primarily positive, which is due to improve over time. As compliance increases in the industry and efficiency optimized, India has a chance to compete globally with decreased logistics costs. To ensure your business meets all GST compliance and reconciliation needs, enlist the aid of the GST experts at H&R Block India.