GST Affects Gati But It Should Be Positive Overall

According to MediaNama, Bala Agoramurthy, director and president of Gati-KWE, told analysts that eTailers were prohibited from influencing product prices, and a reduction in discounts on eTailer websites had slowed down growth for eCommerce shipments.

According to Agoramurthy, there was a shift in sales from inventory-based sellers to other retailers in the marketplace as a result of “a cap of 25 percent on single seller[s] selling on any marketplace.”

The company’s eCommerce revenues saw a 9 percent decline year on year for the June quarter, amounting to Rs 58 crore, but there was annual growth of 28 percent year on year. In May of last year, Gati saw a GMV rate of $9 billion, while the increase this year was marginal.

The company gave conservative guidance of 50 percent growth for the eCommerce business for the year, with Dhruv Agarwal, chief strategy officer, commenting: “I do not think we will see two years’ back growth of 150–200 percent going forward. But it is still going to be 40–50 percent growth across the board.”

COD on orders is currently approximately 20 percent lower than it was 18 months ago, and average eCommerce ticket size was around Rs 2,000. Gati reported 45,000 deliveries per day.

The new regulations have caused eCommerce firms to hire new sellers, and order volume for Gati has thus come down. Also, the delivery weight mix of Gati’s shipments has shifted: 70 percent is less than 3 kg, and 30 percent is above 3 kg. Heavier white goods and electronics, which typically go during sales, did not grow very much because there have been no such sales.

Transportation modes have changed as more shipments are being delivered by surface rather than by air, which will benefit Gati. “Industry-wise, it will be 30 percent air and 70 percent road, maybe more actually. Maybe 40 percent air and 60 percent road, but that is changing,” Agarwal said.

According to Agarwal, Gati stands to benefit from the Goods and Services Tax (GST).

“GST is definitely a huge advantage for us, primarily because we run on systems and processes, which is a big plus when the new regime comes into play… We struggle a lot at the borders between states, where we have stoppages and checks, etc. Once these borders go away, which the government is talking about and promising, our network efficiency is going to increase. Our transit times are going to decrease. We are going to be able to cater to much larger hubs, which will allow us to automate, so thereby, we will see a huge operational efficiency creeping in.”

The only sticking point for Agarwal is that the current proposal is to have a registration in each state rather than a single centralized tax registration.