GST Impact on Supply Chain

supply chain

Supply chain is one the important factor in determining GDP for India. It represents about 13% of the GDP which is double of that for the U.S.A. and few of other robust economies. According to World Bank survey 2014, India stands on 54th position in Logistics performance Index, which has fallen down from previous year rank. It has been anticipated that India will soon hit third highest GDP ranker replacing Japan in projected 2015-20 period.

As the scale of economy is increasing, there will be a situation of hue and cry if the demand is not properly met. At present the supply chain in India is faced with poor infrastructure, volatile customer demand and rising cost of logistics and inventory issues. There is an unorganized network between the upstream and downstream members of the supply chain. Logistics companies are burdened by tax liabilities, uneven credit return, documentation chaos and point after point regulatory stoppages by the state governments, which altogether lead to making the whole process steady.

GST (Goods and Services Tax) is the main agenda of the government at the moment. GST (Implemented in an empirical way.) will suspend the taxation web and thus secure the loss of tax credit and compliance at different levels. The revenue collected under GST will be benefited for the development of physical and social infrastructure. Such advancement in infrastructure will lead to a fast track growth of economy and an increase in International competitiveness will be seen.

GST will make India a common market like EU and there will be a lesser need of vendor price negotiation while trading inter-state. Global organized players will enter in the Indian market as there will be less difficulty in doing business with India. A centralized authorization will come in play for regulatory scrutinization.There will be a improved tax risk management reducing the tax liability for a single player.

Most affected member in the supply chain from GST will be the network and infrastructure associated with warehousing and Logistics hubs. There will be a expansion in the existing warehouses and indeed reduction in the number of the small scattered warehouses. Such huge warehouses will enable a high tech infrastructure for the large load trucks and well planned inventory. A well developed engineered network will be established from beginning to the end of the supply chain. An ideal hub and spoke model of warehousing will then be adopted. A location independent choice will be possible to make for choosing the warehouse.

The Logistics providers need to well prepare themselves in prior of the implementation of GST. They should set up a new framework which is more dependent on the factors like organisation, market forces and fiscal nature.

Post GST implementation the decision in the supply chain will be completely based on operational and logistics efficiency. It is expected that there will a reduction in Logistics and distribution cost which will ultimately save the margins.

There is a ray of hope for every Industry if GST comes in practice. Hope it comes as good and great tax system.

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