India prepares for new trade tax
Revolution in trade predicted from new taxation system
Logistics operators in India are stepping-up efforts to enhance international connections before the new Goods and Services Tax (GST) is introduced this year, which is expected to revolutionise domestic and international trade.
The India-based director of one leading global forwarder told IFW that although the finer details of the GST remained undecided, "if the GST proceeds along similar lines to the most recent proposals we have seen, it will encourage companies to establish larger warehouses to serve as national distribution centres".
He added: “They would be located at strategic points, based on the speed-to-market needed. [This will] have positive cost reductions for most companies.”
As exclusively reported in IFW in October, the countrywide GST will streamline the existing system so that a uniform rate of tax is imposed only once on products, at the point of supply.
Although the deadline of 1 April is expected to slide by six months, the consensus in India is that a GST rate of around 16% will be settled upon, with individual states and the federal government each getting around 8% of the proceeds.
With strong economic growth expected in India this year, TNT told IFW it would grow its domestic network and enhance its international connectivity to the country as it believed the GST would accelerate the development of sophisticated supply chains by removing the array of national, state and local taxes that handicap domestic and international trade.
New air freight services linking India with China and Europe are expected to be announced by TNT during the second quarter of this year.
The current Central Sales Tax is levied on interstate sales of goods. These are subject to a single local sales tax, which makes it financially judicious to hold separate inventories in each Indian state to avoid interstate taxes, despite the inefficiencies and extra management and warehousing costs this loads into supply chains. Widespread tax concessions further skew the market.
The existing system often means that after central and state taxes, goods that cross state borders are often subject to up to 30% tax by the time the product reaches the consumer.
The India-based director of one leading global forwarder told IFW that although the finer details of the GST remained undecided, "if the GST proceeds along similar lines to the most recent proposals we have seen, it will encourage companies to establish larger warehouses to serve as national distribution centres".
He added: “They would be located at strategic points, based on the speed-to-market needed. [This will] have positive cost reductions for most companies.”
As exclusively reported in IFW in October, the countrywide GST will streamline the existing system so that a uniform rate of tax is imposed only once on products, at the point of supply.
Although the deadline of 1 April is expected to slide by six months, the consensus in India is that a GST rate of around 16% will be settled upon, with individual states and the federal government each getting around 8% of the proceeds.
With strong economic growth expected in India this year, TNT told IFW it would grow its domestic network and enhance its international connectivity to the country as it believed the GST would accelerate the development of sophisticated supply chains by removing the array of national, state and local taxes that handicap domestic and international trade.
New air freight services linking India with China and Europe are expected to be announced by TNT during the second quarter of this year.
The current Central Sales Tax is levied on interstate sales of goods. These are subject to a single local sales tax, which makes it financially judicious to hold separate inventories in each Indian state to avoid interstate taxes, despite the inefficiencies and extra management and warehousing costs this loads into supply chains. Widespread tax concessions further skew the market.
The existing system often means that after central and state taxes, goods that cross state borders are often subject to up to 30% tax by the time the product reaches the consumer.
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