We expect GST to be rationalised: Embassy Group

By Aditya Virwani,

The Indian warehousing industry has come a long way from being ramshackle buildings to become the pillar of the manufacturing and other upcoming industries in India. Warehousing has been observing steady growth since 2017 when the sector received infrastructure status.

There was a considerable change in the environment, Government regulations were eased up and well-structured reforms like GST implementation, the establishment of the logistic department in the ministry of commerce and another upgrading in the policy have made the growth even more possible. Growing manufacturing activity, rising domestic consumption, increasing international trade, the introduction of the E-way bill had conveniently accelerated the shift towards organized warehouses with companies like us being a direct beneficiary of this shift.

Since e-way bills are being stabilised, the savings from a reduction in travel and turnaround time had increased gradually. Most companies have started consolidating their warehouses, thereby moving towards a large hub efficiently servicing multiple different businesses. Post the introduction of GST, vehicles are able to cover longer distances every day with an improved turnaround time ensuring that the transporters can successfully carry out their business. The biggest advantage of the GST has been the reduction in inventory which also helped to save cost.

The industry revolutionised with Grade A warehousing in India in the last few years. Third-party logistics players started looking to scale up and made their presence prominent geographically. Ecommerce business flourished as the leasing model of warehousing made the businesses easier to expand their consumer market.

We expect this year GST to be rationalised as it will only help to achieve tangible business growth for all of us. We expect our Government to help drive lower costs for warehouse owners which will also benefit the end-users with lower rent costs. We are hoping that the government would come up with a national logistics policy to be passed in the budget session which makes it easier to determine the feasibility of lands.

Land acquisition is a major challenge for any real estate player. When we are looking at buying 50 acres to 200 acres of land and develop it, we hope for some modifications that make this process for industrial and warehousing purposes a lot easier. The second challenge is approvals. What we have today has definitely improved from what it was a few years back but I think we have scope for improvement there. The policies can become more users friendly. The important thing to understand here is that the more time approvals take; construction would delay and we won’t be able to generate revenues from the land.

Lastly, another major hindrance that we hope the Government takes care of is the slow credit growth. The Indian economy has been facing drastic slowdown which has also affected consumption. We hope the government encourages all dependent sectors like financial services, manufacturing sector, and real estate so that the confidences of these sectors are strengthened.

Allowing GST input tax credit on leasing vs selling creates an uneven impact on warehouse developers but also on larger commercial real estate market encompassing office, malls & other retail development which are put on the lease. If the Government is able to rectify this glitch and treat the sale as well as lease at par and allow the credit, this will entail us to create more infrastructures and commit a lot more capital expenditure.

The growth of infrastructure as a relevant area will help boost the economy of our country. Recently, our Finance Minister Ms. Nirmala Sitharaman has made an announcement of investing Rs. 102 lakh crore in infrastructure over the next 5 years. This will result in investment flowing into the development of roads, ports and ancillary infrastructure; also it will improve the scope of bringing warehouses to newer locations. We believe the growth of the infrastructure sector is in Government’s interest too as it will boost the country’s economy. Certainly, we look forward to seeing some relevant changes post-budget in this sector

Aditya Virwani is the spokesperson of Embassy Industrial Parks & COO Embassy Group