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June 27, 2017
The latest news, company announcements, DGX events and industry-position posts.
Effective July 1, 2017 - The New India Shipping Tax Reform
The most important issue in shipping to, from or within India currently is the new India Tax reform
scheduled to take effect July 1, 2017. This new tax structure will have a direct impact on logistics providers and cost structures. Whether shipping full container loads (FCL) to India, or shipping less than container load (LCL) shipments to India, this new law will impact ultimate cargo and logistics costs.
Currently, each of India’s 29 states taxes the goods that move across their borders at various rates. As a result, freight that moves across the country is taxed multiple times. The Indian government is about to roll out the new indirect tax program, GST, which has been in the works for over 12 years.
The impact of the GST on the individual companies located in India:
The consumer durables sector is expected to witness maximum drop in the logistics costs as a percentage of total sales, as their warehouses are built in certain specific states to avoid interstate tax.
Consumer-oriented industries are going to realize a higher impact from GST on their operations model rather than capital intensive industries, since they will work with cheaper labor and travel further to markets.
As individual companies react to the changing of the law, the long-term economics of doing business efficiently outweigh the economics of where to be located to avoid being taxed. It remains to be seen what the ultimate impact will be on the economy or the country, but DGX predicts the Indian Government will rise to the challenge and make adjustments where needed to ensure a single industry does not become the poster child for unfairness.
From our standpoint and the standpoint of other 3PLs, the impact of the new GST on third party logistic service providers will be as follows:
Post-GST implementation, most 3PLs will have to restructure their assets and realign their operations with changes in the operations of their customers in the new scenario.
Currently, many 3PLs have warehouses located near major distribution centers of their key clients (different industries) irrespective of geographic disadvantage, mainly to avoid interstate taxes.
However, post-GST implementation 3PLs are expected to build integrated warehouses at logistics suitable locations. So accordingly, 3PLs will have to restructure their assets to accommodate the long distance consignments which will occur with this scenario of free movement of goods across the country.
The consumer durables sector is expected to witness maximum drop in the logistics costs as a percentage of total sales, as their warehouses are built in different states to avoid interstate tax. Mostly, the consumer-oriented industries are going to have the highest impact of GST on its operations model rather than capital-intensive industries.
How this will impact the freight rates with a change of cargo movement from direct to each state versus to regional DCs (spoke-hub distributions) is yet to be determined by carriers.
The DGX India headquarters in Mumbai is ready to take on these changes and provide our customers with added-value solutions as they evolve in their supply chain based on these reforms.
What is GST? How does it work?
GST is a single, indirect tax for the whole nation, which will make India one unified common market.
It's a single tax on the supply of goods and services, directly from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
What are final GST rate slabs?
The Goods and Services Tax (GST) will be levied at multiple rates ranging from 0% to 28%. The GST council finalized a four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional “cess.” In India, "cess" is an import or sales tax on a commodity.
Service tax will go up from 15% to 18%. The services being taxed at lower rates, owing to the provision of abatement, such as train tickets, will fall in the lower slabs.
In order to control inflation, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate.
The lowest rate of 5% would be for common use items. There would be two standard rates of 12 per cent and 18 per cent, which would fall on the bulk of the goods and services. This includes fast-moving consumer goods.
Highest tax slab will be applicable to items which are currently taxed at 30-31% (excise duty plus VAT).
Ultra-luxuries, demerit and sin goods (like tobacco and aerated drinks), will attract a cess for a period of five years on top of the 28% GST.
The collection from this cess as well as that of the clean energy cess would create a revenue pool which would be used for compensating states for any loss of revenue during the first five years of implementation of GST.
Finance minister said that the cess would be lapsable after five years.
Which Taxes at the Centre and State level are being subsumed into GST?
At the Central level, the following taxes are being subsumed:
Central Excise Duty
Additional Excise Duty
Additional Customs Duty commonly known as Countervailing Duty
Special Additional Duty of Customs
At the State level, the following taxes are being subsumed:
Subsuming of State Value Added Tax/Sales Tax
Entertainment tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States)
Octroi and Entry tax
Luxury tax, and
Taxes on lottery, betting and gambling
Shipping Containers to and from Hawaii
There are a variety of items to consider when determining how to ship a container to Hawaii. The first couple of items are the transit time and deadlines you may have to meet.
From our experience on timing and deadlines, no one is faster than Matson Navigation Company, a primary mode of ocean transportation for DHX - Dependable Hawaiian Express. Matson’s transit times are shorter than the other ocean carrier by a day from Long Beach, and out of Oakland and Seattle. The other carrier, Pasha Hawaii, does not compete time-wise. Barge services offering Hawaiian Island connections also do not compete time-wise to or from Hawaii. So, if you are under a deadline or transit time is important, your first option will be Matson.
Another important factor is the origin of your container being shipped to Hawaii. From most origins within the US other than the West Coast, the rail transit times and rail service between the two are very similar. Pasha’s overall rail/inland may be a little less expensive, usually within $100 of Matson’s. Most intermodal or rail moves get shipped into Los Angeles for the subsequent sailing to Hawaii.
You’ll also want to look into the pricing of your container shipment to Hawaii. Depending on whether your shipment to Hawaii is recurring in nature or not, and depending if you are a business or an individual, your pricing will normally be at published tariff rates. If you are not a business and if your shipment of containers to Hawaii is not recurring in frequency, the ocean carriers have tariff rates allowing them to charge everyone uniformly.
Matson tariffs have evolved over a 100+ years, and they are based on a combination of the service offerings Matson has, the value of the goods in the container, the likelihood that what's in the container can be damaged, the weight of the container’s contents, etc. The competitor to Matson is Pasha and they normally have a tariff that is quite similar to Matson’s tariff, so the pricing is similar except if one of the carriers can be negotiated with to price their shipments differently.
DHX - Dependable Hawaiian Express has people who are experts in the carriers’ tariffs and have the knowledge to help you ensure your shipment arrives on time, intact, and competitively priced.
We represent a very healthy option for a business interested in reducing their rate basis as well as for those looking for answers to questions with respect to shipping containers to Hawaii.
Congratulations DHX - Dependable Hawaiian Express, Oahu!
In June 2017, we will celebrate the 25th anniversary of opening our own trucking terminal and delivery operation in Honolulu on Oahu.
A huge gamble and large investment at the time, DHX - Dependable Hawaiian Express opened in Honolulu, Oahu. Like all other freight forwarders then, we were using trucking agents to deliver freight across the island. Because we used third-party agents, the quality of the service was not reliable and the scope of services we could offer was limited such as short or long term storage and warehousing, assembly and distribution, or local trucking. We were a freight forwarder to Hawaii, like many others, but opening on Oahu made us distinct among the forwarding community.
Although we had started a trucking operation in Guam in 1989, the Honolulu operation helped us define future strategies in the islands. Once we had quality under control with freight handling being done through a single group of companies with the same management, we evolved into an outstanding service from the beginning of the shipment move to the end.
We started using credos like “on time, intact, every time” because we controlled all aspects of the move. Excuses like, "we'll have to check with our agent to see if they can do that and if there will be additional charges," went away because
the agent and could easily make these business decisions. For customers, that meant less waiting, more seamless operations and a better quality shipping service to Honolulu. Because Oahu worked out so well, over time we expanded our delivery operations to include the destination ports Kawaihae on the Big Island and Kahului in Maui.
DHX - Dependable Hawaiian Express Honolulu has earned a big 25th anniversary congratulations! We wish to thank the management and staff for contributing to making us the biggest and best among all our competition there.
Thank you, DHX – Dependable Hawaiian Express, Oahu and Happy Anniversary! You help make us DEPENDABLE. From Start to Finish!
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