Lower GST, Faster Growth: Why India’s Logistics Sector is Set for a Big Boost
This isn’t just a tax cut—it’s a catalyst for India’s logistics sector, poised to slash costs, ignite demand, and drive efficiency
Picture a truck speeding across the National Highway, its cargo of festive goods reaching markets just in time for Diwali shoppers. Now imagine that same truck moving faster, cheaper, and greener, thanks to a bold policy shift. In early September 2025, the GST Council unveiled GST 2.0, a game-changing reform streamlining tax slabs to primarily 5% and 18%, with items shifting from 12% to 5% and from 28% to 18%. This isn’t just a tax cut—it’s a catalyst for India’s logistics sector, poised to slash costs, ignite demand, and drive efficiency.
The timing is electric. With Navratri and Diwali around the corner, lower GST rates promise to make everything from garments to electronics cheaper, fueling a consumption surge. For logistics, this means a spike in delivery volumes, from urban quick-commerce to rural bulk shipments. Yet, as global uncertainties mount, these reforms are a critical lifeline, not just for logistics but for India’s broader economic ambitions
Rationalising GST: Unlocking Demand and Boosting Efficiency
India’s logistics sector, long saddled with high costs, has been a bottleneck compared to global peers. Initiatives like the National Logistics Policy and PM GatiShakti have already cut transit times, but GST 2.0 turbocharges this progress. By resolving inverted duty structures, it unlocks working capital for SMEs. For logistics firms, this translates to savings on freight, warehousing, and fuel-efficient vehicles, enabling investments in AI-driven route optimization and IoT for real-time tracking.
A rationalised structure will reduce these distortions and allow businesses to optimise logistics more effectively. These benefits can also cascade across every node of the value chain.
● Freight stability: Automotive and industrial supply chains can lock in predictable long-term freight rates, reducing shocks from tax differentials.
● Warehouse viability: A lower slab on warehousing and handling services improves the economics of hub-and-spoke models, encouraging investments in large regional warehouses.
● Cash flow optimisation: Courier firms and 3PL startups benefit from reduced credit blockages, allowing them to expand into underserved Tier-2 and Tier-3 markets.
● Stimulating consumption: Lower incidence on essentials and mid-market goods encourages faster turnover in FMCG and retail categories, leading to higher primary and secondary freight movement.
● Liquidity release: SMEs and logistics operators often face refund delays; smoother input-tax credit flow strengthens cash positions and accelerates fleet reinvestment.
● Compliance predictability: Fewer slabs mean fewer disputes on how goods or services are classified, ensuring pricing contracts remain stable and reducing post-audit uncertainty.
Festive Quarter: Creating a Multiplier for Consumption and Logistics
The festive season represents the single largest opportunity for retail and logistics players. Lower GST at this point becomes more than a tax relief; it becomes a demand catalyst, encouraging discretionary spending and creating volume-led efficiencies for freight networks.
● Consumer behaviour: GST savings passed on by retailers can trigger purchases in categories such as consumer electronics, apparel, and home goods.
● Logistics throughput: Higher order density means fuller truckloads, more efficient last-mile delivery, and better utilisation of hubs.
● Job creation: Seasonal spikes in courier and warehouse employment will be amplified, supporting livelihoods and strengthening local economies.
Strengthening India’s Position Amid Global Uncertainty
As global supply chains grapple with currency swings and weakening exports, India must reinforce its domestic foundations. Rationalised GST helps offset external shocks by strengthening demand and reducing logistics inefficiencies, while also positioning India as a competitive supply chain base.
● Offsetting external risks: Export-heavy sectors like textiles and engineering can redirect focus to domestic demand with lower logistics overheads.
● Enabling MSMEs: Smaller manufacturers and suppliers gain the ability to scale nationally with reduced taxation on interstate freight.
● Global competitiveness: Lower and more predictable logistics costs make India an attractive destination for multinational companies looking to diversify manufacturing bases.
Beyond GST: Structural Reforms for Long-Term Competitiveness
GST rationalisation is a significant milestone, but sustaining the momentum requires structural support. Infrastructure development under PM GatiShakti and the National Logistics Policy must continue, with investment in multimodal corridors, regional hubs, and inland waterways.
Technology adoption is equally critical. Digital documentation, automated tolling, and real-time tracking are essential for modern logistics. Combined with simplified refund processes and reduced red tape, these reforms will allow businesses to focus on efficiency and scale.
The Road Ahead
With GST 2.0 set to be implemented on September 22, its immediate effect will be visible in the festive quarter, boosting consumption and logistics volumes. But its true significance lies in the long-term.
A leaner, more predictable GST framework can lower logistics costs, encourage investment in warehousing and multimodal networks, and enable MSMEs to expand nationally. Over time, this strengthens the freight and logistics industry—the very backbone of India’s ambition to become a multi-trillion-dollar economy. By reducing the cost of moving goods and enhancing supply chain efficiency, India will position itself not just as a consumption-led economy, but as a manufacturing hub capable of competing with global peers.
The article is authored by Venu Kondur, Co-Founder and CEO, LOBB.
