The transportation business forms the backbone of the business sector. Every kind of business since all types of businesses require transportation whether while transporting the finished products to the market or to procure the raw materials or to deliver from one business unit to another. Irrespective of the size if the transportation business, whether heavy motor vehicles or light motor vehicles, the transportation business is vital for the smooth, hitch-free functioning of almost all businesses.
Like all other businesses, the transportation business too has to deal with taxations. Before the introduction of Goods and Service Tax or GST in July 2017, transportation businesses had to deal with complex tax structures. They had to spend a lot of time along with resources on filling out the paperwork for payment of transportation taxes and adhering to tax compliances and depositing interstate sales tax amounts. There were octroi check posts at interstate borders where vehicles, especially large transportation vehicles like trucks, had to line up to show their papers and pay the tax. This monitoring and collection of sales tax at the check posts led to traffic congestion, which in turn led to slower movement of the vehicles and even resulted in a loss of money apart from time and the pollution caused was an additional disadvantage. This entire process slowed down transportation time considerably.
However, this entire situation disappeared after the introduction of GST. Now, GST does away with separate taxes for transportation businesses and there is now a unified taxation structure for goods and services. Thus, post GST there is no longer the need for interstate check posts. And the travel time for cargo trucks and long haul vehicles reduced significantly. In fact, the statistics suggest that after border check posts were dismantled, the switch to GST led to at least 20% reduction in turnaround time of trucks. This, in turn, has helped the economy too.
This proves that GST is actually beneficial to the transportation business, specifically, and all businesses in general. Therefore, businesses must get themselves registered under the GST scheme immediately after going through the checklist for GST registration because GST has a number of benefits apart from doing away with cumbersome interstate transportation tax.
GST has a number of benefits for the logistics and transportation business.
Benefits Of GST For Your Transportation Business
- Saves Time And Money
Previously, transportation businesses had to maintain warehouses in various States owing to the varying taxation structure across different states and the different taxes applicable. This affected the business as it was a huge economic burden on the business to maintain the warehouses. Additionally, the cost incurred while paying the interstate border tax, the paperwork to be maintained and time wasted while these taxes were paid affected the overall productivity of the transportation business. GST thus helps save valuable time and money.
- Single Taxation Rate
The different taxation laws across various States affected the transportation business and other businesses since they had to maintain warehouses across State borders to comply with State taxation codes. However, with a single and unified taxation rate, companies can now operate with a single warehouse at a central location and employ the service of transportation and logistics companies to help maintain the supply and distribution chain of goods.
- Aids Forward Integration
With the abolition of the previous tax codes, including the interstate border sales tax, transportation companies can operate faster and also can offer their services at a lower rate, since they are not paying higher taxes now. This means that other businesses would opt for transportation companies more often and thus help forward integration of all the businesses.
Other benefits of GST on the transportation business include-
- There will be larger trucks on the roads thanks to the favourable nature of GST and because of larger trucks, there will be fewer vehicles/trucks as the large one can do the work of two or three trucks combined. Thus productivity will increase and other expenses will reduce.
- GST will help bring in scale to transportation companies as there will be a lot of savings, stoppage of wastage and lower number of delays.
- The positive impact of GST and its benefits will lead to greater scale-up of the transportation business and logistics operators and lead to more companies outsourcing their logistics operations.