Navigating the Path of Progress: E-commerce and Logistics Expectations in India's Budget 2024-25
As we stand at the threshold of a new fiscal year, all eyes are on the Budget of India for 2024-25,
with expectations in the E-commerce and Logistics sectors reaching a peak. The interplay of
technology, policy, and infrastructure funding is pivotal for these industries, with stakeholders
eagerly anticipating measures that will spur growth and address critical challenges.
Rethinking GST for Last Mile Food Delivery:
A major issue in the gig-based last mile delivery sector is the current GST structure. At present,
restaurants and hence B2B logistics players shoulder the tax burden for last mile delivery, impacting
the competitiveness of restaurants and networks such as the Open Network for Digital Commerce
(ONDC) compared to food aggregators. Their inability to claim input tax credit on this expense puts
them at a disadvantage which has very recently been highlighted by the NRAI. The budget is
expected to introduce a more equitable taxation framework that promotes fair competition and
levels the playing field.
Overcoming GST Challenges for Third-Party Logistics:
While traditional bulk movement benefits from a streamlined GST process, e-commerce logistics,
with its diverse range of SKUs, requires extensive documentation. A truck may carry thousands of
different SKUs for different customers shipped via different clients and the sheer number of pages
ends up crossing hundreds. The proposed solution is to adopt digital record-keeping to simplify the
process and reduce paperwork. Transitioning to a digital approach will not only streamline
operations but also align the sector with the government's broader digitization objectives.
Another aspect creating major confusion in the logistics network is around “returned shipments” –
items which the end customer does not want and hence have to be sent back. These items are
essentially “unsold” inventory and typical GST rules cannot apply to them. Clearer rules here will
save a lot of time at GST checkpoints helping reduce costs and ease of doing business.
Maximizing Railways and Inland Waterways:
For e-commerce logistics, speed and reliability are essential. Today, 96% of India’s commerce runs
on trucking which is tangibly slower. Remaining 4% is taken up by Airways which is very expensive.
Railways was to be the ideal solve for giving speed at much improved cost but India has been unable
to unlock that potential as of yet. Using parcel van coaches in passenger trains is common, but
challenges like load offloading, train cancellations, high degree of theft and limited express goods
trains act as a major impediment. We hope the budget can introduce measures such as guaranteed
capacity for parcel van coaches, daily operation of express freight trains, and facilitating easier
access for trucks on trains, particularly over longer distances. Digitizing railway bookings, reducing
costs through direct booking, and addressing loading/unloading errors are critical for making rail
transport more viable and cost-effective.
Refining Location and Pincode Mapping:
In today's digital world, precise location mapping is crucial. However, India’s pincode boundaries
often lack clarity for both end customers and logistics providers, affecting delivery efficiency. The
budget could allocate resources to redefine pincode boundaries, making them clearer and more
accessible – or incentivise methods to improve usage of digital location for parcel movement. By
creating smaller grids, the government can assist both customers and businesses in navigating rural
and urban pincodes, enhancing the logistics ecosystem's efficiency.
Role of EVs in the Logistics Sector:
Electric vehicles in various form factors will be key enablers of growth, with an expected increase in
the adoption of electric vehicles for intra-city logistics. Reducing the carbon footprint will be a key
focus area across the industry. Developing EV infrastructure like charging stations is crucial for
accelerating electric vehicle adoption. Government policy on EV infrastructure will play a pivotal
role. The lack of infrastructure coupled with a high cost of EVs has been a barrier in the gig economy
space. And even if we get past these, there is an acute supply shortage restricting any major growth
spurt. A lack of standardization in batteries is also creating challenges in expansion. At this stage of
India’s electric journey, it may not be a bad idea to revisit the current strategy and policy framework
and convert it into a revised vision which can lead us to electric 2.0 and help India achieve 100%
electric vehicles by 2030.
As the budget approaches, the logistics/e-commerce sector is anticipating significant developments
from the government that will shape its course in the coming years. In addition to the above,
incorporating GST benefits for electric vehicles (EVs) could drive uniform adoption, with potential
considerations for an additional environment cess on non-EVs and incentives for EVs. Moreover, a
relentless focus on gender diversity is required, as the contribution of the women's workforce is
currently lacking, and improving this could be highly beneficial for the industry. Policies and
infrastructure that promote this could unlock immense potential for both the women's workforce
and the logistics industry.
