It is an Indirect tax which is about to replace the tax levied by the state and the central government on the manufacture, sale and consumption of goods in India. As a part of 122nd amendment of the constitution of India this bill has been introduced which is believed to change the structure of taxation in India. The rate of taxation under Goods and services tax is to be lower than before but only with the increase in the number of assesses. This is how the financial ministry is thinking to cover up for the lower taxes levied to the companies.
Impact on Supply Chain
The effect of Goods and services tax is estimated to show positive effect on the overall supply chain in India. This has a lot to do with the geographical locations of warehouses in respect to their presence in numerous states. Earlier this used to be problem when to avoid taxes from many states they had to limit the number of warehouses. Now since the state taxes are cut off and only GST remains they can afford to have multiple warehouses and transportation all across the country. This will bring down the overall inventory cost of the product and will bring the transportation as well as delivery systems to their full potential and may have a great impact over reduction of inflation.
The save coming from Goods and services tax will help the companies for further investments in the improvement of further supply chain. The design of supply chain is going to vary a bit after its implementation and cost of customer service will go down which will reduce the liability on the manufacturers and there can be a cost cutting among various services provided. With this the forecast of the market will be easier as it will reduce many more calculations out of the picture. Large warehouses can take over smaller ones to optimize their managements.
These are positive impacts predicted from GST:
- Raw materials can be stored statewise
- Price range will vary
- Improvement in quality
- Forecasting would be better
- Inventory management will be better
- Capacity can be expanded
- Manufacturing flexibility can be implemented
IMPACT ON WAREHOUSING
The warehouse locations have generally the direct impact on the costing of the product. The cost of production sometimes is overtaken by storage and transport. With new tax standards this can be managed better and then the warehouse locations would not be of much relevance as state taxes are removed. The access to main routes will be easier and the highways national or state can be easily managed for transportation. Local companies can restructure their warehouses in India and can have a star model for networking, where one central warehouse can manage multiple hubs, like many of the online business companies have been managing uptil now. This has become possible for not only the larger fishes but is also available for the local businessmen when the warehouse they take for lease can have such system set up with them.
The best thing being achieved by the companies is the cost efficiency. When the supply chain runs smooth it automatically reduces many costs from the companies whether it be 3rd party logistics manufacturers. There would be less stress on some particular warehouse and this would be chance for many real estate industrial developers to construct many more as there is going to be a larger demand for new warehouses at various locations. The only thing necessary for the companies is to understand the advantages and plan their strategy accordingly so that they can avail maximum benefit out of it. The route planning is going to be a hard task as there would be a wider geography to cover for with the expanding businesses.