Flying Squads Replace Check Posts As States Limit GST Gains
Transit time of goods under GST has improved by 90 minutes at best, says Crisil.
Overzealous states may be partly negating one of the biggest gains from India’s new nationwide tax: easier movement of goods.
Trucks were held up at borders for three to six hours earlier, getting documents verified, goods vetted and freight weighed by state authorities, a Crisil report said. A uniform Goods and Services Tax made that redundant, paving the way for faster transportation. That’s not how it has played out in the first four months of the new levy.
Truckers have seen only little improvement as they continue to face scrutiny from states suspicious of losing their share of revenue from the GST, according to the report. “Suspicious states” are setting up flying squads to stop and inspect vehicles on highways or dismantled check posts to corroborate their GST revenue, which now comes from the central government. The transit time for goods has gone down “at best” by around 90 minutes on a net basis, Crisil said citing its interaction with fleet operators and its own estimates.
Truckers in India lost 60 percent of their transit time at road blocks, tolls and other stoppages which pushed up logistic costs up to three times higher than global benchmarks, the World Bank said in its India Development Update 2014. Dismantling of inter-state check posts was one of the crucial reforms to improve the manufacturing competitiveness. Simply halving the delays could cut logistics costs by 30-40 percent and transit time by 20-30 percent, the World Bank had said.
After the GST rollout, trucks are plying just 25 kilometres more everyday on an average, Crisil said. That’s 20 percent less than what was estimated.
The GST Council has planned to introduce an e-way bill across the country in a phased manner by March 2018. It requires any goods over Rs 50,000 in value to be pre-registered online before shipment. All this data would be stored on a centralised platform. It would help track the movement of goods without the need for physical verification.
Demand Yet To Pick Up
Yet, even a slight improvement in the transit time has led to another concern: poor utilisation rate. That’s because demand has not revived after the GST rollout.
“While trucks are reaching their destinations faster than before, their wait for freight has become longer because there isn’t a significant and concurrent increase in demand,” said Prasad Koparkar, senior director at Crisil, in a media statement. That’s reduced the utilisation rate as fewer trucks are now required to move the same amount of goods, he said.
The de-facto checks on trucks need to end to improve the turnaround time, said Binaifer Jehani, director at Crisil research. “And for the full benefits of GST to be realised, it is critical that freight demand picks up in the coming quarters.”
GST has also brought about a change for truck dealers. Before GST, manufacturers kept most of their new trucks at their regional stockyard and sent a few to dealers to avoid central sales tax. Now truckmakers have started directly billing dealers for most of their sales, which increases the latter’s working capital requirements.