This year, there was a huge expectation that the Union Budget would lay down the map for Indian Logistic Sector as this was the last full budget before the election. With General Elections due next year, the Finance Minister has aptly laid down expenditures on healthcare and agriculture mostly focusing on the rural economy. Logistics is the lifeline of all businesses and hence, needs special attention. So what is the impact of the Union Budget on the logistics and shipping sector? The Union Budget has focussed on infrastructure spending and initiating Operation Green. Indian Export Sector pins its hope on massive agriculture growth, which constitutes to 10% of the country’s exports. With the current major changes in agro-trade policies could lead newer avenues for logistics to sow their seeds in.
Policy for the Logistic Sector in the Budget
- Announcement of development of online National Logistics portal to provide a single window clearance for all major issues faced by the logistics industry
- Inclusion of logistics parks in the harmonized list of infrastructures
- Rationalisation of customs duty provisions and assessment, to align with trade facilitation commitments and reduce litigation
Direct tax Proposal
- The presumptive income of heavy goods vehicles (more than 12 MT GVW) increased from the current INR 7,500 per month (or part of the month) for each goods carriage to INR 1,000 per ton of GVW or unladen weight, as the case may be, for each such heavy goods vehicle or the amount claimed to be earned, whichever is higher
- Reduction in corporate tax rate to 25% for companies having turnover up to INR 250 crore in FY 2017
Indirect tax Proposal
- Increase in the median rate of customs duty - levy of Social Welfare Surcharge (of 10%) on the aggregate customs duties/ taxes/ cesses on import of all goods in the First Schedule (excluding IGST and GST Compensation Cess) and abolition of Education cesses (of 3%)
- Audit allowed to be conducted at the premises of licensee of a warehouse or any other person concerned directly or indirectly in clearing, forwarding, stocking, carrying, selling or purchasing of imported goods or export goods or dutiable goods
- The rate on motor vehicles if imported as a CKD kit has increased from 10% to 15%, whereas the rate on motor vehicles imported as CBU has increased from 20% to 25%
- Valuation provisions introduced, for computing IGST on the sale of goods deposited within a warehouse prior to clearance for home consumption or exports. In case the warehoused goods are sold more than once, the transaction value of the last such transaction is to be considered for valuation purposes
- Exemption from IGST paid on aircrafts, aircraft engines and other aircraft parts imported into India extended retroactively for the period from 1 July 2017 to 8 July 2017. In cases where tax has been deposited on such imports, refund to be availed within 6 months from the date of Presidential assent to the Finance Bill, 2018
Overall, this budget seems to be a mixed bag – increase in spending on the Green Corridor and completion of the over 9,000 km of National Highway will give a boost to the sector. But there seem to be no concrete steps to reduce the overall costs of Logistics as a part of GDP – and we may just see a few prices rise with the increase in import duties on imported edible oils & food items.
The Finance Minister has carried out a fine balancing act – and the best that can be said about this budget is that it is a Balanced Budget.
The views expressed by the author are his own views and understanding about the Budget and in case of any query you can contact him at firstname.lastname@example.org
Do you have something to add? Write to us at email@example.com and we would love to include it in this analysis.