GST Rollout: Octroi abolition may save Rs 2,000 crore, cut freight … – Economic Times

MUMBAI: Abolition of octroi could result in saving of more than Rs 2000 crore and cut down freight time for trucks and commercial vehicles by at least 25%.

As many as 22 states have abolished their check posts since July 1 with the advent of GST. Tax rate on transport services has been increased to 5% from 4.5%, which will be borne by the buyer or seller of the goods whoever is availing the freight services; the latter can then lower final tax liability by claiming input credit. Also, a GST notification exempting registration of some of the associated entities would save transporters from a lot of paper work.

Less time, less cost "On an average we spent three hours waiting at the check posts and there was a lot of harassment. In addition, if there are any minor issues with the documents, there was delay of another 3 to 4 hours. And irrespective of whether the documents are in order or not, there was always some bribe to be paid to officials," Said Anil Vijan of G Shantilal Transport Company who operates a fleet of 80 trucks in the southern states. According to him, covering the distance from Mumbai to Bangalore, along with loading/unloading of cargo, should not take more than 18 to 20 hours, but all trucks had to wait for an extra 6 to 10 hours at the two check posts on the route.

Surjeet Singh Chawla of Chawla Road Lines who operates a fleet of 35 trucks on the Mumbai-Kolkata route had to deal with five check posts. "We expect to save one full day now," said Chawla.

According to industry circles, bribes at each check post was anything between Rs 200 and Rs 1000 per vehicle; the average time wasted was around 5 to 7 hours. Bribes added 3% to the total cost; delays stretched the travel time by 25-40%.

"Post GST, overall direct savings estimated for the operators is close to Rs 2000 crore which could lead to significant improvement in the return on assets ratio for ground transportation companies," said Sandeep Upadhyay, senior vice president, Infrastructure Solutions group, Centrum Capital. In the listed space, companies such as VRL Logistics, Gati and TCI are the major players in the segment. When contacted, VRL and Gati officials said that the development was a big positive but refrained from spelling out the gains.

Spokesperson for Bombay Goods Transport Association (BGTA), too said that the savings for the industry would be substantial and the state government too would save upto Rs 2000 crore.

Typically, a driver of a commercial vehicle putting in 12 to 13 hours a day covers at least 350-375 km. Long hours and hurdles on the way often made certain routes unviable for many fleet operators. As a result operators chose to limit services to specific routes.

More business for transporters Businessmen like Nilesh Rajpopat, owner of the Mumbai based Noble Industries which makes metal pipes, is exploring the possibility of tapping markets in other states. Thanks to discrepancy and complications related to various state taxes, till now he only dealt with buyers of a handful of states. If more like him reach out to buyers in other states, demand for transportation services is expected to rise. Rajpopat felt some of the railway freight traffic could move to roads.

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GST Rollout: Octroi abolition may save Rs 2,000 crore, cut freight ... - Economic Times