Ravi Shingari, Associate Director, Tax, KPMG
In parity with the international trends, the logistics sector in
India, over a period of time, has developed into a key service sector
helping majority of businesses (including automobile, pharmaceutical,
FMCG among others) concentrate on their core activities while their
logistics requirements are taken care of by such third party logistics
companies.
However exorbitant logistic cost (14% of the total value of goods)
still erode the competitiveness of the Indian goods in the
international market and shall continue to do so unless corrective
measures are not taken, according to The Associated Chambers of
Commerce and Industry of India (ASSOCHAM).
The Joint Paper brought out by KPMG-ASSOCHAM says that administrative
hurdles account for large delays and additional cots for the logistics
sector. The Paper further says the areas of improvement exist in all
segments of logistics chain viz., trucking, warehousing, rail
transport, port operations, customs procedures, material handling etc.
while each of these needs to be addressed in their individual contexts
at the earliest, the greater imperative is to coordinate the
initiatives in a phased and planned manner.
Budget 2009 is expected to be positive for the logistics sector as
various policy initiatives may be announced to boost the industry. The
industry strongly suggests setting up a separate regulatory authority
for the logistics sector as a whole along the same lines as the
Insurance Regulatory & Development Authority and Telecom Regulatory
Authority of India.
The frequent suggestions voiced by the industry today include, among
others, the following:
* The Indian Railways' plans to set up a Multi-modal Logistics
Park and intelligent inventory management at selected locations along
the Dedicated Freight Corridors (DFCs) should be taken on a
war-footing
* Allow issuace of Form 'C' for setting up ports, logistic parks,
transportation facilities, etc. (similar to power, telecom) by way of
suitable amendemnt in CST laws
* Provide an exemption from applicability of Service tax on
various infrastructure/ construction projects in relation to logistics
sector (at present such exemption has been granted to ports, airports
etc. but not specifically for logistics sector)
* Currently, services in relation to logistics sectors are covered
under various services categories like Cargo Handling, Business
Support, Transportation of goods by Air/ Road/ Rail, etc. and there
appears to be an overlap as regards the scope of activities covered
under each of these categories which leads to confusion as regards
taxability and classification. Accordingly, suitable clarifications
should be issued regarding classification of services and
applicability of Service tax on various revenue elements pertaining to
logistics sector to avoid any disputes with the authorities
* Currently, Service tax laws provide an option to discharge
Service tax liability under abatement scheme in certain specified
categories (including transport of goods by road/ rail). However,
service providers engaged in providing similar services (along with
other services) who are discharging their liability under other
taxable categories (e.g. Transport of goods by air) do not have such
an option. Accordingly, suitable amendments be made in Service tax
laws, providing the option to pay Service tax under abatement scheme
under such other categories
* While export cargo is exempt from Service tax under Cargo
Handling services and Transport of goods by air service, similar
exemption is not currently provided under other taxable categories
like Transport of goods by road/ rail and Business Support Services. A
blanket exemption may be granted to such export cargo irrespective of
classification
* Imported raw materials & parts for use in manufacture of
specified ships enjoy exemption from effective Customs duty. However,
similar exemption is not provided from levy of Excise duty on domestic
procurements of such raw materials and parts meant for manufacture of
ships. Such anomaly should be done away with to boost the domestic
industry
* Centralized toll mechanism is needed to ensure uniformity in the
toll charges paid by trucker drivers at various check points.
* Since time-definite delivery is critical, inter-state
check-posts should have a clearance passage for refrigerated
transportation
Consequently the logistics sector expects the Government to take note
of its long pending demands and bring about positive and encouraging
policy changes to help provide boost to this deserving sector.
**
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