Saahil GOEL

CEO and Co-founder, Shiprocket

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Here’s What The Logistics Industry Expects From The Union Budget 2022

The industry will expect the government to either reduce the GST slab or bring fuel under the GST regime to benefit the entire industry.

The logistics industry has evolved and progressed tremendously over the past two years from being at the forefront of disruption at the outset of the global COVID-19 pandemic. The pandemic reinforced the case for long-awaited structural reforms in the industry, and it has adapted fairly quickly despite massive supply chain disruptions worldwide. With businesses across verticals realizing the significance of a robust logistics system, the sector has become the backbone of the trade industry, and leveraging cutting-edge technologies has further fuelled its growth.

Besides the progress it has made on its own, government support in several initiatives like toll-free roads, tax extensions amid the pandemic, etc., has assisted India’s logistics sector to become one of the fastest-growing globally. As of 2021, India’s logistics sector was valued at USD 160 billion and is projected to reach USD 215 billion by 2022. The Union Budget 2022-2023 holds particular relevance for the industry, especially considering the surge in cases of the new Covid variant. As the Union Budget fast approaches, here’s what the logistics sector expects from the government to facilitate further growth.

Reduce compliance burden

Fundamental aspects such as registrations still need to be done through multiple channels – one for each kind of registration. However, suppose the government brings all the roles, such as company incorporation, GST registration, MSME Certificate, etc., under a single umbrella. A single window for registrations will save time, cost, and effort and will be immensely beneficial for emerging logistics platforms.

Compliances relating to Inter-state movements got eased with GST but there are other simplification opportunities. There could be a single window documentation to avoid inter-state border issues. The Government could enable an online system to not only help create but also to verify the documents required to move goods from one state to another.

Overall, the industry would expect continued push from the government for higher digitisation (documentation, compliance, data storage, etc) and automation (self drive vehicles, infra monitoring and maintenance, robotics, AI/ML) to lower compliance costs

ESOP tax exemptions for start-ups

In today’s day and age, when organizations are constantly on the lookout for top talent, ESOPs (Employee Stock Ownership Plans) are key to attracting and incentivizing talent, particularly for startups. Levying taxes on ESOPs at the time of ‘Exercise’ i.e. when they are converted to stocks only puts an added financial strain on the recipients who do not have ready cash in their hands. So, an exemption of ESOP taxes on exercise will go a long way in allowing companies to hire top talent and grow rapidly. Instead, the government can introduce taxation on the final sale of the shares to ease the burden.

Controlling the high logistics cost through the inclusion of petroleum products under GST & allowing ITC on cross border freight

One of the primary challenges that the Indian logistics sector faces is the high overall cost of logistics. Already impacted significantly by rising fuel prices, the non-inclusion of fuel in the GST regime simply adds to the burden, given that the GST for fully built logistics vehicles stands at 18%. The industry will expect the government to either reduce the GST slab or bring fuel under the GST regime to benefit the entire industry. Such measures will bring down the overall logistics cost, giving a boost to the economy.

Further, tax reforms to consider all air/sea export freight as export, irrespective of the location will help to claim input tax credit (ITC) and will incentivize logistics players in cross border trade.

A firm move on the National Logistics Policy

Another critical expectation from the Budget would be for the government to firmly implement the National Logistics Policy, introduced over a year ago. The much-awaited policy can boost the industry by streamlining and strengthening it, promoting the frictionless movement of shipments across the country, making it easy for platforms to operate daily. Besides, a comprehensive logistics policy will help reduce inefficiencies and improve global competitiveness, enabling India to become a USD 5 trillion economy by providing a global perspective rather than just a domestic one.

Infrastructure boost

Apart from the expectations mentioned above, the government must focus on bolstering the infrastructure in the sector – a crucial step to minimize cost and facilitate progress. With the third wave of the pandemic looming ahead, policy reforms, tax exemptions/relaxations, investment in the industry to develop multi-modal logistics for enhanced efficiency, capital subsidies for the construction of Grade-A warehouses in tier-II and tier-III cities, etc., will go a long way in changing the status quo of the industry. With the Union Budget 2022 on the horizon, the sector expects many measures to be announced and implemented effectively.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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