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 start-ups 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.

“We believe GST is good for the e-commerce industry as it would eliminate hurdles in inter-state delivery and subsume the entry tax introduced on e-Commerce shipments by some states,” a spokesperson for Amazon India said.

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 barriers at state borders will ease. The complexity of paying different taxes in 29 different state territories will also ease. Warehousing will become more integrated. We won’t have to set up warehouses in different states,” TA Krishnan, CEO of logistics firm Ecom Express said.

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.

“The cost of logistics is currently very high in India, costing about 15 percent of GDP. In mature markets, it stands at about 8 percent. With GST, multiple layers of tax will reduce thus bringing down the overall cost. In the long-term, it will also help reduce the unorganised element in the logistics sector,” Neil Shah analyst with Counterpoint Research says.

This will boost demand for high tonnage trucks and lead to overall reduction in transportation costs, he adds.

Source: Money Control