Rating agency Crisil in its latest report has stated that the implementation of Goods & services tax (GST) will help reduce logistics costs for companies by up to 30 percent over 3-4 years due to savings in warehousing cost and elimination of check-posts.
Crisil has stated that once the CST (Central sales tax) is phased out, optimisation of warehouses and inventories will accrue in savings on logistics, while the elimination of check posts will also help deliver savings as goods move faster. It added that manufacturers of non-bulk goods spend about 5-8 per cent of sales on logistics. GST will save warehousing costs of 1-1.5 per cent of sales over the next three-four years. On the same time elimination of check-post delays will yield additional savings of 0.4-0.8 per cent, thus taking overall savings to 1.5-2 per cent of sales.
The assessment of the agency showed the consumer durables sector to be the biggest beneficiary of GST, potentially saving 30% of logistics costs from current levels of 7-8% of sales. The sector has the most number of warehouses set up solely to avoid paying CST and hence offers maximum scope for consolidation.
The rating agency though raised concern over the government’s proposal of allowing states to levy an additional tax of 1 per cent on supply of goods in lieu of CST for two years, saying that this is against the core principle of GST, and will defer full benefits of the rollout.