Freight charges expected to drop 4-10%

Freight charges are expected to come down by 4-10 percent following the imposition of a uniform 5 percent GST rate due to input tax credit.!!!

Freight charges are expected to come down by 4-10 percent following the imposition of a uniform 5 percent GST rate for goods transport in all modes, and the input tax credit benefit for transporters, third-party logistics firms, common carriers, packers and movers, and freight forwarders, according to the Indian Foundation of Transport Research and Training (IFTRT).

Impact neutralized

At present, the retail goods booking and delivery service providers (goods agents) levy a service tax on gross freight charges displayed on the consignment note at 4.75 percent.

“If the input tax credits are taken into account on GST on purchase of vehicles, tires, insurance cover, and other goods and services by common carriers, retail goods booking agents, the impact of 5 percent service tax will be neutralized. So, freight cost is expected to drop by over 4 percent with the implementation of goods and service tax,” the IFTRT noted.

Contract Logistics

However, in the case of contract transport business and door delivery transport services provided by logistics firms, the current service tax stands at its peak rate of 15 per cent.

In this case, the service tax under the new GST regime, after adjusting the input tax credit, will lower the effective service tax on gross freight by 10-12 per cent, at a conservative estimate.

Moreover, with more companies adopting electronic toll collection, the truck fleet turnaround is expected to go up by 25-30 percent with GST implementation.

Archit Gupta, Founder and CEO, of Cleartax.com, felt that the proposal to give input tax credit will encourage several unorganised truck-owners to register themselves under GST. By registering, they will also get access to a lot more business.

Source: https://goo.gl/bdHQxZ