India is set to roll out the Goods and Services Tax (GST) from July 1, which is expected to pare the costs borne by logistics and e-commerce startups face in India.
The e-commerce players that depend heavily on third-party logistics firms to transport goods to the customer’s doorstep have largely welcomed the new GST regime, which they say will ease the hassle of inter-state ferrying of goods under a centralised tax regime.
Apart from easing the hurdles in transporting goods across states, the uniform tax will also bring down costs of warehousing. There will be a move to create bigger distribution centres, as Indian companies would now need fewer warehouses.
The GST regime has mandated all online marketplaces to deduct 1 percent tax from the proceeds given to merchants and suppliers, which is expected to impact the cash flows of the sellers.
Currently, online marketplaces and logistics companies have set up warehouses in different states in order to avoid tax burden of different regions.
According to Care Ratings, the GST is expected to trim logistic costs by up to 20 percent from the current levels.