Rethinking GST for last-mile food delivery:
A major issue in the gig-based last mile delivery sector is the current GST structure. At present, restaurants and hence B2B logistics players shoulder the tax burden for last mile delivery, impacting the competitiveness of restaurants and networks such as the Open Network for Digital Commerce (ONDC) compared to food aggregators. Their inability to claim input tax credit on this expense puts them at a disadvantage which has very recently been highlighted by the NRAI. The budget is expected to introduce a more equitable taxation framework that promotes fair competition and levels the playing field.Overcoming GST challenges for third-party logistics:
While traditional bulk movement benefits from a streamlined GST process, e-commerce logistics, with its diverse range of SKUs, requires extensive documentation. A truck may carry thousands of different SKUs for different customers shipped via different clients and the sheer number of pages ends up crossing hundreds. The proposed solution is to adopt digital record-keeping to simplify the process and reduce paperwork. Transitioning to a digital approach will not only streamline operations but also align the sector with the government’s broader digitisation objectives.Another aspect creating major confusion in the logistics network is around “returned shipments” – items which the end customer does not want and hence have to be sent back. These items are essentially “unsold” inventory and typical GST rules cannot apply to them. Clearer rules here will save a lot of time at GST checkpoints helping reduce costs and ease of doing business.Maximising railways and inland waterways:
For e-commerce logistics, speed and reliability are essential. Today, 96% of India’s commerce runs on trucking which is tangibly slower. Remaining 4% is taken up by airways, which is very expensive. Railways was to be the ideal solution for giving speed at much improved cost but India has been unable to unlock that potential as of yet. Using parcel van coaches in passenger trains is common, but challenges like load offloading, train cancellations, high degree of theft and limited express goods trains act as a major impediment. We hope the budget can introduce measures such as guaranteed capacity for parcel van coaches, daily operation of express freight trains, and facilitating easier access for trucks on trains, particularly over longer distances. Digitising railway bookings, reducing costs through direct booking, and addressing loading/unloading errors are critical for making rail transport more viable and cost-effective.
Refining location and pincode mapping:
In today’s digital world, precise location mapping is crucial. However, India’s pin code boundaries often lack clarity for both end customers and logistics providers, affecting delivery efficiency. The budget could allocate resources to redefine pincode boundaries, making them clearer and more accessible – or incentivise methods to improve usage of digital location for parcel movement. By creating smaller grids, the government can assist both customers and businesses in navigating rural and urban pincodes, enhancing the logistics ecosystem’s efficiency.
Role of EVs in the logistics sector:
Electric vehicles in various form factors will be key enablers of growth, with an expected increase in the adoption of electric vehicles for intra-city logistics. Reducing the carbon footprint will be a key focus area across the industry. Developing EV infrastructure like charging stations is crucial for accelerating electric vehicle adoption. Government policy on EV infrastructure will play a pivotal role. The lack of infrastructure coupled with a high cost of EVs has been a barrier in the gig economy space. And even if we get past these, there is an acute supply shortage restricting any major growth spurt. A lack of standardisation in batteries is also creating challenges in expansion. At this stage of India’s electric journey, it may not be a bad idea to revisit the current strategy and policy framework and convert it into a revised vision which can lead us to electric 2.0 and help India achieve 100% electric vehicles by 2030.
As the budget approaches, the logistics/e-commerce sector is anticipating significant developments from the government that will shape its course in the coming years. In addition to the above, incorporating GST benefits for electric vehicles (EVs) could drive uniform adoption, with potential considerations for an additional environment cess on non-EVs and incentives for EVs. Moreover, a relentless focus on gender diversity is required, as the contribution of the women’s workforce is currently lacking, and improving this could be highly beneficial for the industry. Policies and infrastructure that promote this could unlock immense potential for both the women’s workforce and the logistics industry.
The writer is Co-Founder and Chief Business Officer at Shadowfax.
