GST: End of road for check gates

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Bikky Khosla | 01 Aug, 2017
The Goods and Services Tax (GST) would benefit India's small businesses, accelerating transportation of goods across the country, Prime Minister Modi recently said in a meeting. A recent report by the Ministry of Road Transport and Highways echoes a similar view. It says a single GST will lead to increased uptime for trucks, better turnaround and optimized warehousing structure. It all sounds reasonable. In fact, logistical efficiency is considered to be one of the key aspects of the new tax regime, and it seems the sector now stands at a transformational moment.

The benefits are obvious. According to a recent report published by Transport Corporation of India (TCI) and IIM-K, the delays caused at interstate check gates impose transaction costs of around $21 billion annually on India's businesses. They affect efficiency as well. The transport ministry report adds that a typical truck spends nearly 16 percent of the time at check posts. This is why a truck in India covers an average annual distance of only 85,000 km against 150,000 to 200,000 km in advanced countries. And now with most of the states abolishing their border check gates, we can expect a better situation.

Also, none could be happier than our truckers for whom check gates were not only about delays. Besides spending long hours, at times a full day, at check posts they faced rampant corruption and harassment, with a horde of petty government staff extorting money in the name of various taxes. They were often forced to unload and reload goods in the name of checking. Time and again, it was pointed out how these check gates turned into cash cows for corrupt officials, political leaders, ministers, self-styled NGOs and even underground outfits. Now we can expect these practices to come to an end.

But uncertainties still prevail. First, despite abolition of the tax check gates, we still have scores of laws regulating the movement of goods in the country. So, there are still many reasons why trucks could be stopped and inspected. We need an integrated system of checks and inspections. Second, concerns abound over the e-way bill mechanism. The draft rules require a truck to generate an e-way bill even for interstate movements. Also, under the mechanism transporters require to change the vehicle number every time the shipment changes trucks. These concerns should not go overlooked.

I invite your opinions.