Free Trade Warehouse Zones (FTWZs) and GST

The Government of India has allotted special zones called Free Trade Warehouses to promote trade. The advantage with these warehouses is companies can store there stock in these warehouses and can pay the customs duty only when they actually pull the stock out of the warehouse. For example, the a major petroleum corporation in Rajahmundry needs to replace its oil rigs immediately after damage. Any delay of more than 4 to 5 hours will result in huge loss in production. These oil rigs are imported and will take atleast a week to be imported. So the petroleum corporation actually will import the oil rig and store in the FTWZ near to Visakhapatnam. The moment they need the replacement, they will immediately pay the customs and bring it to Rajahmundry.

These are some of the advantages of these FTWZs promoting industrialization. However, there are some regulations and restrictions in the kind of stock that can be stored.

Similarly, with the coming of the GST tax system, the whole country becomes a level playing field. Earlier because of different tax structure in different states, the warehouses are constructed in every state to avoid inter-state sales tax, etc. So even if there is no necessity to put a warehouse in Kerala, companies will still have warehouses in Kerala. Similarly, the whole distribution system is established in a way to minimize the taxes which is the reason why most companies have their warehouses in Pondicherry, and other union territories where taxes are low.

The Government of India helps the industries in this regard, as the percentage of taxes paid in India is one of the highest in the world. With the new GST system, the distribution will be well connected and will be set up for efficiency in the distribution to the consumer rather than reducing taxes. This helps in the better service to the customer and also cheaper services to the customer.