GST on Export Freight will increase export product cost indirectly, opines Kamal Jain, Director, Cargomen Logistics

National logistics policy is giving impression about Government of India concern and  understanding over export costing. It is also understood from the NLP that GOI (Government of India) is poised to take all steps to remove regulatory hurdles and doing everything to increase logistics efficiency to reduce cost of export, but the GST on export freight is an opposite action, and is reverse to the spirit of the policy.

It is well understood that GST on export freight is not cost and reversal in the form of ITC (input tax credit) is available, but the duration for which 18% GST is spent by logistics service provider is a cost to logistics service provider and it is loaded in the offered freight to exports. Be it  AIR CARGO AGENT or a SHIPPING AGENT usually give Freight credit indirectly financing logistics cost of exports by way of providing credit from 30 days to 90 days and this additional load of GST by way of 18% will aggravate cash flow issues. In order to mitigate the cash flow issue of 18%, he will approach lender/ bank to bridge the gap and this additional credit will have cost. If we calculate present market rate of money, it will automatically make freight costlier between 2 to 3%, which will be added to the logistics cost.

As  per the national logistics policy, Government of India is putting effort is to reduce logistics cost from 13 to 14% to 7 to 8% of global standard but additional cost due to GST will jeopardise such efforts. GST Levy on exports will also increases compliance cost as full input credit is permitted which not fetch any additional revenues to the Government of India but would increase compliance cost to the taxpayers.

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