Deutsche Post DHL Group will invest 250 million euros ($268 million) in India by 2020 to expand its logistics business and tap demand as the South Asian nation introduces a national sales tax that is set to boost movement of freight.
The goods and services tax will help create bigger distribution centers, Deutsche Post AG Chief Executive Officer Frank Appel said in an interview in Mumbai on Friday. Until now, Indian companies were setting up warehouses in all states to avoid tax burden while the new tax reform may realign the needs of local companies toward larger and fewer mother warehouses, he said.
The goods and services tax will replace an archaic web of levies and improve ease of doing business in a country with more than 1 billion consumers. Proposed over a decade ago and then refined several times to win bipartisan support under Prime Minister Narendra Modi, the tax is scheduled to be rolled out on July 1.
“We want to consolidate our distribution centers,” Appel said. “We follow our customers. We adapt to their needs.”
The 250 million euros will be in addition to the 70 million euros invested in India in the last 18 months, he said. The investment would include all units of DHL Group in India and would cover airport cargo facilities in Mumbai and Delhi of unit Blue Dart Express Ltd.
The new tax will create an opportunity to optimize the logistics network based on cost and service quality instead of arbitrage tax systems, Appel said. More manufacturers will emerge in India as they don’t have to worry about tax provisions.
“Goods and Services Tax is a very robust step in realizing ‘Make In India,’” Appel said, citing Prime Minister Modi’s flagship program designed to lure investment in the nation’s manufacturing sector.