The Goods and Services Tax (GST) is likely to be legislated in 2017. Over the years, the GST has faced innumerable challenges due to issues regarding its structure, tax bracket and subventions for states that may face revenue loses. To better understand the impact of the GST on the warehousing sector in India, CBRE Research conducted a survey of leading warehousing space occupiers to gauge their views on the new taxation regime; understand their strategies in the post GST era; and ascertain the impact of the GST on their overall business and operating costs. Survey respondents included leading corporates in sectors such as third party logistics (3PLs), e-commerce, engineering and manufacturing, fast moving consumer durables and non-durables, pharmaceuticals and retail. Approximately 63% of respondents were domestic corporates, while the remainder was headquartered abroad. Following are the key findings:
How GST will help
The removal of various federal tax barriers and creation of a common market will improve supply chain efficiency and attract more FDI. Stipulations in the proposed law are expected to result in better tax conformity, while removing the cascading effects of the current tax regime. This may promote high and long-term economic growth and usher in reforms across a number of major business segments. The manufacturing sector, in particular, is forecast to see stronger investment activity.
Taxes to be covered under GST
It will cover taxes such as central excise duty as well as state level taxes including VAT or sales tax, entertainment tax, entry tax, purchase tax, luxury tax and octroi.
As per the CBRE data, Delhi-National Capital Region (Delhi-NCR) has substantial warehousing operations, witnessing an average annual take-up of 2.5 million sq. ft. of space for the past three years. Bangalore in the South and Mumbai in the West are other key markets for warehousing operations. In recent years, leasing activity in Bangalore has been driven by 3PL and e-commerce companies, which collectively accounted for close to 35% share of the 1 million sq. ft. of space leased in the city during 2016.
Elsewhere, Bhiwandi, in the Mumbai Metropolitan Region (MMR) has been favoured by occupiers owing to its proximity to the Jawaharlal Nehru Port and easy connectivity to residential hubs in Mumbai, Thane city and surrounding regions. State wise analysis revealed that survey respondents had a relatively larger presence in Maharashtra, Karnataka, Tamil Nadu, Delhi and Andhra Pradesh, all of which are the country’s biggest manufacturing and consumption hubs and possess relatively developed infrastructure networks.