Logistics

‘GST will lead to 112 per cent growth in warehousing’

Our Bureau MUMBAI | Updated on June 22, 2018 Published on June 22, 2018

A file photo of a warehouse.

India will see 112 per cent increase in warehousing space by 2021 as GST is pushing companies to re-structure their portfolio and bring in larger and supply chain-efficient warehouses rather than focusing on tax saving through smaller facilities.

“GST is playing a pivotal role in boosting both the hub and spoke model as well as the growth of the Multi Modal Logistics Park (MMLP) due to which India will have around 25 new MMLPs in the next few years,” realty research firm JLL said in a report today.

While grade A warehousing space is expected to grow by over 170 per cent, Grade B will grow by around 85 per cent from 2017-2021. The warehousing sector is expected to grow at an average CAGR of over 20% in the next three years 2018 – 2020, it said.

‘Positive effect’

“Implementation of GST has had a positive effect on warehousing due to diminishing state boundaries and has made way for cost and operationally efficient hub and spoke model. Further, the government’s support through policy initiatives like establishment of logistics division, granting logistics ‘infrastructure status’ and establishment of MMLPs is paving way for boosting the logistics industry,” Ramesh Nair, CEO and Country Head, JLL India said.

Moreover, GST implementation has shifted the end user demand and developer supply from inefficient, low quality redundant warehouses to large box, good quality Grade A warehouse, he added.

In an earlier report, JLL India had estimated that close to ₹45,000 crore will be invested in creating storage facilities across India from 2018-2020. In these three years, different categories of warehousing will also create jobs to the tune of 2,00,000 at different levels of specialisation.

GST will promote efficient and larger warehouses as they are expected to have economies of scale, increasing the per cubic metre storage efficiency. And reduction in tax cascading may lead to lower cost of production and distribution, which can be eventually passed on to the consumers, it said.

Published on June 22, 2018
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