The Infrastructure status for logistics provides the benefit of easy fund raising
India stands at an inflection point characterised by confidence and conviction on the back of reforms like GST, pro infra developments, demonetisation and bank recapitalisation. Reforms during the year have already boosted global investors’ and stakeholders’ confidence. These measures will see a reduction in logistic cost, which will help the industry to become competitive and gain a significant share in the global markets.
Going forward, the Union Budget FY19 needs a major thrust. The Union Budget for 2018-19 should continue on Prime Minister's vision to build a new India. Budgetary allocations in key infrastructure projects announced recently will be an important factor to watch out for, to drive growth and employment.
The industry is expected to benefit from policy changes in transportation and infrastructure. Logistics industry forms an integral part of almost all sectors and hence the benefits in the union budget 18-19 to allied sectors like automotive, healthcare, retail etc will have a rub off effect on logistics companies. The transportation projects would aid transportation and logistics companies by reducing costs, increasing transit speeds and lowering turnaround times.
The government has already increased annual budget for road project from Rs. 40,000 crores to Rs. 1,30,000 crores annually this year and targeting Rs 1,50,000 crore next year. The road construction would further gather momentum with average addition of 28 km per day by March this year and 40 km per day by next year.
Further, for decongestion of corridors the government has planned various initiatives like 28 ring roads and 40 bypasses. Along with these initiatives, various national corridors are planned under the Bharatmala scheme which is expected to reduce supply chain costs from 18-6 in the long term.
Increased allocation and clarity in execution is expected in this year’s Union Budget for transportation and infrastructure projects which is vital for the growth of the logistics sector. We also look forward to some more clarity on certain aspects related to GST. For instance, anomalies of Good Transport Agency (GTA) under GST where tax rate is 5 percent for RCM and 12 percent for taxed invoice needs to be reconsidered for bringing them in parity. Further, a company can take either stand, that is, 5 percent for RCM or 12 percent for charging GST on Transportation. It is a challenge as different customer have different requirements and as an organisation it’s important to get the flexibility, hence we look forward for the government to resolve this anomaly.
Logistics has been accorded the Infrastructure status. A further tax benefit for warehouses, freight corridors and other infrastructure projects would encourage improvement and investment in overall infrastructure and also improve the employment rate in India.
Another aspect that would reflect in the budget is pro exports oriented policies. Exports increased 12.3 percent to $27 billion in December, while higher gold and crude buys lifted imports by 21.1 percent to $41.9 billion. Lucrative proposals to uplift the exports would work favourably for the economy. As trade would get an impetus, logistics companies stand to benefit and would go a long way in reducing overall cost of logistics.
From the tax point of view, the budget would likely incorporate a reduction in corporate taxation that would make corporations more competitive. We may also see some benefits given to digital transactions to promote a cashless economy. From the logistics standpoint a lot has been done in this direction for instance e-tax filing, e-sanchet etc. Further push for digital administration is expected.
Any new tax incentives will further boost the growth of the industry and help the country in bringing down the overall logistic cost. The Infrastructure status for logistics provides the benefit of easy fund raising. The confidence of business and investor community is dependent on the stability of policy rollouts, thus a consistent policy keeping long term stability in mind is the need of an hour. We are hopeful that the Union Budget will bring cheer to the economy.
Author is CEO - Customs Clearance & Freight Forwarding at Avvashya CCI LogisticsNot sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.