Complete phasing out of central sales tax and dismantling of check-posts key to realising full benefits
A recently released report from CRISIL Research expects the rollout of Goods and Services Tax (GST) to reduce logistics costs of companies producing non-bulk goods by as much as 20 per cent but emphasises that to maximise benefits from the rollout of GST, it is imperative to completely phase out of Central Sales Tax (CST), (currently paid for inter-state movement of goods) and dismantle of state-level check-posts is imperative.
The projected savings will accrue from a gradual phasing out of CST, consolidation of warehouse space, and faster transit of goods since local taxes (such as octroi and local body tax) will be subsumed into GST.
The report points out that to get states on its side, the government has proposed allowing states to levy an additional tax of one per cent on supply of goods in lieu of CST for two years. CRISIL Research analysts believe this is against the core principle of GST, and will defer full benefits of the rollout in addition to delaying the dismantling of check-posts so critical to ensure faster transit of goods. Today, a considerable amount of journey time – estimated at a quarter – is spent at check-posts and city entry points, which add to the cost of transporting goods, and forces companies to maintain buffer inventories.
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