Logistics: Commit to GST timeline

Mahendra Agarwal, MD and CEO Gati

Businesses are starting to understand that the location and the role of the ware­house will be driven as much by inventory policies and transportation infrastructure as by changes in taxation. We expect that the 2012-13 budget will introduce indirect tax reforms that support the implementation of GST in the near future. It is also expected though that the government will not back a new timetable for actual implementation.

The implementation of GST is highly unlikely to proceed as per the April 2012 schedule and no new deadline is expected to be established. The continued delays in progressing these landmark indirect tax reforms not only extend the duration of current barriers to economic reform, but extend the time to delivering real value to the country and its people. Continued uncertainty around when GST will arrive and how it will be implemented means that companies cannot make firm plans on required business process transformations and re-engineering of their supply chains. From an infrastructure perspective, this means that the focus on the development of supporting infrastructure is not being driven by a plan based on the actual demands of industry. This should be of significant concern to those involved in the development of warehousing, road and rail infrastructure.
The desired policy change: While it is expected that it will still take some time to gain required consensus the gov­ernment needs to commit to a firm implementation timeline and stick to it.

Implications: By committing to a firm timeline for the implementation of GST an agenda of outstanding issues and a schedule for resolution would need to be established. The initial benefit of this is that the actions that need to be completed would be subject to greater public scrutiny and help force the required parties to the table. The benefit to the industry is that the reality of impending change would need to be accepted and work started on effective responses. As an example, current common thinking is that GST will mean that companies will shift to centralised mother warehouses. While supported by the practices of companies in developed countries the same app­roach should not be so readily accepted here in India.