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KUWAIT CITY: January 25, 2018. According to the latest survey of global logistics executives by Agility, India's GDP is accelerating again after early 2017 when businesses struggled to adjust to the requirements of the new Goods & Services Tax (GST), and small enterprises and consumers were trying to cope with the replacement of bank notes used for most everyday transactions.

Introduction of the GST in India has eliminated a tangle of state-level taxes in favor of a single, unified tax. As a result, manufacturing and sales slowed early in 2017 as companies destocked and began to examine more closely their inventory, distribution and strategic supply chain needs.

Gateway terminal MumbaiRemoval of taxes imposed at state borders has since reduced transit time for domestic freight movements and has spurred the growth of e-commerce, says Agility. Amazon and others are investing heavily and consider India the world's fastest-growing e-commerce market.

Many logistics customers in India are still scrutinizing their distribution requirements, something likely to continue well into 2018, the company adds.

Although generally seen as positive, the company thinks the GST regime is still "sorting itself out" as the freight industry faces an additional administrative compliance burden as GST is a state-level tax. In the case of Agility, GST can mean proliferation of invoices and the generation of massive amounts of data to be reconciled with invoices. "Monthly tax calculations can be cumbersome," it notes.

While unbalanced input/output taxes within a state can result in cash flow difficulties because refund processes and interstate transfers of credits are not yet in place, ultimately increased compliance is expected to lead to simplified and reduced tax rates.

Agility says it believes Customs reforms have helped to make Customs clearance in India much easier. Reforms are in place for recapitalizing banks, and it notes there is a new strong bankruptcy law that helps to restructure companies in an orderly manner.

"The introduction of national ID is an effort by the government to close loopholes in the tax system and to identify 'shell' entities previously used to hide income or provide a shield for questionable activities." Agility says an estimated 200,000 companies have been identified for closure.

Demonetisation, although largely negated by the reissuing of new bank notes, has had the impact of forcing significant funds back into the banking sector where they are now traceable. Meanwhile, Moody's has raised India's credit rating from the lowest investment grade of Baa3 to Baa2, and changed its outlook from stable to positive.

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