It has been just over a month since the ‘game-changing’ Goods and Services Tax—the new centralized tax on goods and services that has eliminated the numerous different rates applied by various states across the country—launched in India.

Taking A Second Look

      While the ‘One Nation, One Tax’ received the initial welcome (although IATA and quite a few freight forwarders wanted more clarity about some sections of the tax) it appears now that the government will have to strategize fixing the anomalies.
      The PHD Chamber of Commerce and Industry (an apex organization with a geographical span covering 12 States of the country, the PHD Chamber acts as a catalyst in the promotion of industry, trade, and entrepreneurship) has pointed out that if GST were levied on air exports, it would be “totally unfair” and would “stifle the growth of air cargo.” Pre-GST, freighters did not pay any tax, but now 18 percent GST has been levied. In fact, the Chamber has gone ahead to declare that India would be an “exception” if it applied the 18 percent tax since freight is not taxed anywhere else in the world.

Business in Leaps & Bounds

      “At a time when the domestic civil aviation industry anticipates that India will be among the tenth largest international freight market by 2018, with domestic Indian air cargo increasing by 7.3 percent as per current estimates over the 2016 rate, subjecting international freight at 18 percent GST is totally unfair as it will stifle the growth of air cargo,” the Chamber said. It went on to ask: “Why would the government of India want Indian exporters to pay an extra 18 percent GST on freight and make our goods non-competitive in the international market?”

Deepening Paperwork Jungle

      Echoing similar sentiments, the Express Industry Council of India (EICI represents a cross-section of members drawn from international and domestic express companies) has said that while the GST has reduced logistics costs, its members were concerned about the requirement of e-waybills for the movement of goods. This, according to EICI’s Chief Operating Officer Vijay Kumar would not only reduce the savings, but also increase logistics costs and delays.
      The e-waybill that has been proposed by the government demands a transporter to log into the GST network and generate an e-waybill providing a vehicle number from the time a shipment is picked up. Every time a vehicle is changed, e-waybills have to be generated until the shipment is delivered to the consignee. On average, a delivery cycle necessitates transshipment at least three to four times. So, instead of reducing the paperwork, it would increase manifold. 
      The EICI COO said that since the Express Delivery Services (EDS) offered door-to-door, time definite services for carriage of small packages comprising urgently needed aircraft parts, medical equipment, electronics, auto components, textiles, garments, etc., speed was “the differentiator in comparison to other modes of transport” and delivery time was generally “measured in hours instead of days.” The operations demanded use of the hub and spoke model with multiple transshipments as well as multiple forms of transportation including air, road and rail. So, demand of separate e-waybill would act as speed breakers.

Impacts Countrywide

      Others who have been hit hard by the introduction of the GST are members of the Indian diaspora, especially in the Middle East. Before GST, these Indians (a very large percentage are low-paid, blue-collar workers) could send up to $320 worth of goods tax-free to India. After GST, goods worth only $35 can be sent tax-free. As a result, the first few weeks after GST saw huge loads stuck at Indian airports for lack of clearance.

Stuck In Transit

      The Dubai-based Federation of Indian Cargo Agents (Middle East) was quoted saying that blue-collar workers had been using the door-to-door cargo services for sending goods home as gift items. With the 41 percent revised tariff, 300 tonnes were stuck at Delhi, 100 tonnes at Mumbai, and another 100 at Bengaluru.
Tirthankar Ghosh