Transport industry seek clarity on tax deducted at source rules

Big companies in India’s road transportation industry, already burdened with high working capital requirement in a sluggish economy, are confounded by the Budget’s proposal to deduct tax at source for firms plying, hiring, leasing and owning more than 10 trucks.

Transporters are unable to understand whether this ‘burdensome’ provision to deduct 2% tax at source is applicable to truck owners like Transport Corporation of India (TCI) and Patel Integrated Logistics or/and to those who ply trucks without owning it such as Mahindra Logistics. TCI’s joint managing director Chander Agarwalsaid since policy is not clear and no discussion has been done in any forum, it’s difficult for him to comment. Usually it is not just vehicle owners who are subject to tax deducted at source (TDS) but also service providers, he added.

“There is confusion and we are seeking clarity. But this is going to make my life cumbersome. The whole idea of the new government was to make it easier to do business but we will end up focusing more on the paperwork and regulations,” said Areef Patel, vice-chairman at Patel Integrated Logistics. Transport Corporation of India like Patel Integrated Logistics owns as well as leases trucks.

Industry experts said working capital requirement in this single-digit margin industry could go by 20%. AllIndia Transporters Welfare Association, which represents about 100 logistics and trucking companies, is going to make a presentation to the central government soon.

“I don’t think it is a good move. We will end up claiming refunds because our margins are in lower single digits. It will be a long and a tedious process. Transportation companies usually need two months revenues as working capital at any given time,” said Vivek Arya, managing director at Rhenus Logistics India, which is a part of a Germany-based Rhenus Group.

Transporters unable

Mahindra Logistics’ chief executive officer Pirojshaw Sarkari said he does not expect that much pressure on cash flow for his company as it has no debt on its books. The effect is likely to be higher on leveraged companies, he added. Indian trucking industry is highly fragmented. About 75% of trucking firms own small fleets of less than five trucks, with only 11% operating more than 20 trucks, according to a report released by National Transport Development Policy Committee.