Research

GST Before Logistics and GST After Logistics: The Facts, Differences, Benefits, and Some Disadvantages You Must Know

Published on May 18, 2025

After demonetization, another big thing that came to India was the implementation of GST (Goods and Services Tax). The sudden rise of the goods and services tax, despite getting a negative impression from some, actually reformed the Indian economy in a much better way.

Over time, it was understood that this was much needed, and it actually helped in organizing and setting up different logistics and transport sectors to speed up their overall processes. From the movement of trucks to managing a good economic supply chain, GST has affected logistics in a great way.

GST Council Meeting

Various case studies were carried out, and it was seen that there was a 20% reduction in turnaround trucks after dismantling at the border checkpoint. Implementation of the Goods and Services Tax also benefited e-bills.

The logistics sector in India is worth $130 million, and the number is gradually increasing with each passing day. Logistics is one of the major sectors contributing a significant amount to the Indian economy, and it is also a catalyst to speed up India’s manufacturing and e-commerce dreams.

Growth and Evolution

The logistics sector has evolved over time, and the implementation of different, innovative ideas has not been in vain. Starting out as just first-party logistics, the sector grew in baby steps towards a value as large as $130 million.

Right after first party logistics came second and third party logistics. They started providing a complete package with all kinds of services and made international dealings possible. From including transportation, warehousing, pool distribution, packaging solutions, inventory management, management consulting, logistics optimization and last-mile delivery, the logistics sector complements advanced supply chain facilities.

Every day, over seven million vehicles move all across the country to deliver products to people’s houses. The statistics have shown an increase in freight shipping volume to about 1325 billion and these numbers are predicted to double by 2025.

Some of the major GST effects on the present and future are listed below:

Helped logistics and e-commerce achieve their potential

The integration of the multilayer goods and service tax turned the Indian tax system into a unified one and eased the way of conducting business.

The process reduced the overall transportation tax and helped in enhancing various logistics decisions. This not only helped logistics move forward but also helped the logistics industry reach its potential in terms of matching high-quality service levels and growth.

Reduced Transit Time

Being one of the most preferred modes for transportation, over-the-road delivery has experienced a reduced transit time.

The regulatory impediments and in-transit delays have greatly reduced, and other organizational dysfunctions have also significantly reduced. There used to be a lot of hassles that decreased the efficiency of the logistics. The implementation of a unified GST market has

provided increased efficiency.

According to reports, since 2017, there has been a smoother flow, and functioning has become more seamless than before. The company says that GST has enabled logistics companies to deliver goods more efficiently, optimize delivery timelines, and improve capacity utilization.

Significant reduction in paperwork

With the evolution of this unified tax structure, there has been a significant reduction in paperwork and consolidation. Early, a lot of trucks were stopped at borders due to

different and pending paperwork. No,w with a single document available, it has become easier for logistics carriers to carry out deliveries much faster.

There has also been a consolidation of small stock transfer warehouses, that led to a reduction of overall warehouse maintenance costs. It also increased GDP and entailed new compliance that was much needed for the e-commerce and logistics sector. It also helped different companies use available tax credits for buying vehicles and materials.

Eased out synchronization between buyer and seller

With the implementation of the Goods and Services Tax, the logistics industry started exploring new innovations for their supply chain models, which helped in building a better customer-seller relationship.

In the past few years, the perks have been great, and we hope that they continue to benefit the sector in the same way in the years to come. But the longevity and the consistency can only be understood over time.

Disadvantages

The tax system, which replaced the GST, was not helping the logistics sector to grow as 17 different taxes were charged in this sector and different states had different tax systems. So, the industrialists established different warehouses at different places in India to make their businesses run longer.

Given below are the 5 economic disadvantages caused by the pre-GST logistics/warehousing system.

Needless Capital Expenses

Before GST, logistics companies could not do without centralized warehouse systems (or hub and spoke model); rather, they had to establish separate warehouses in each state where they provided services. This resulted in unnecessary expenses of capital for building warehouses, whereas centralized warehouses would have been more effective,

both cost-wise and service-wise. The added cost negatively impacted the growth of these warehouse businesses.

Delay in Business Operations and Services

Even if it had a long-term financial incentive, the tax system before the implementation of the GST slowed down business growth in many ways. Some of the reasons are:

Capital shortage

Problems faced during the process
Problems faced while finalizing the warehouse-like
Desired locations
Capacity requirement
Project costs, etc.
Poor Integration of Technology Means

Due to the high implementation cost and high tax levies before GST, organizations were not able to integrate high-end technologies and functionalities into their establishments. Since they were forced to build many small warehousing units rather than Grade A warehouses, they were unable to leverage from state-of-the-art infrastructure facilities comprising automated sorters, assembly lines, Pick/Put to Light systems, automated packaging, and dimension weight scanning.

High Cost of Transportation

Freight carriage takes the highest share, i.e., approximately 50 percent of the entire logistics expenses within the logistics operations. Before GST, the tax structure was quite complex and required transporters to move between multiple small warehouses, increasing the cost and time of supply and making the overall process inefficient.

Warehouse Inefficiency

In the pre-GST model, businesses were required to establish and trade through smaller, distributed warehouses where they could only store limited supplies and perform

specific operations. As compared to that, GST focuses on a centralized warehousing system under which Grade A and B warehouses with better operational capabilities and maximum productivity are being promoted.

The above problems took a U-Turn at a very good note when the GST was implemented in the country. The supply of the Indian warehouse industry is successfully growing year by year, unlike earlier.

As per the Realty Research Firm JLL India, the warehousing industry in India is going to see a growth of 112 percent by the year 2021, if compared with 2017 i.e., when GST was just rolled out. Altogether, there will be a growth of 170 percent in the Grade A warehousing and approximately 85 percent in the Grade B warehousing.