Prateek Shukla (Roll no.-122065)
Table of Contents
Importance of a Sound Taxation Policy3
Taxation Scenario in India3
Goods and Services Tax4
Key Characteristics of Indian GST4
GST and FMCG Supply Chain4
Major Impact Points of GST on Indian FMCG Supply Chain Industry5
Impact due to Extended CGST5
Impact due to Subsuming Octroi & Entrant Tax5
Impact due to Removed Tax Barriers in Cross Border Sales5
Impact on Companies network6
Impact on Cost and Investments6
Impact on Service7
Impact on Freight cost7
Taxes Absorbed Under GST8
Introduction and implementation of the Goods and Services Tax (GST) can be looked upon as one of the most long-awaited essential economic reforms which are expected of the current Indian Government. India’s existing multi layered tax system has been a key element for FMCG’s for planning, establishing and structuring their supply chain factors like manufacturing bases, distribution networks and procurement partners. Implementing the dual GST system in India will have profound effect on the working, planning and management of the supply chain of FMCG industries. Some of the positive effects can be the reduction of warehousing costs due to rationalization and reorganization of warehouse networks, reduced inventory level, simplified warehouse planning and easy and simplified warehouse management. GST can also bring some negative effects like higher lead times to customer and higher freight costs, but all these effects can be negated and even used to the advantage with better strategy and planning of FMCG industries.
Importance of a Sound Taxation PolicyTax policies have an important impact on the economy as they affect both efficiency and equity. A suitable tax system must be designed keeping factors like income distribution , industrial macro environment and also aim to generate revenues through taxes to support the government in working towards infrastructure development and public service. There are broadly two types of strategy which can be used to maximize government equity, namely Horizontal equity model and Vertical equity model. The main characteristic of the vertical equity model is increasing revenues through high marginal rates of taxation, it can be applied to direct as well as indirect taxes. The horizontal equity model depends upon broad, transparent and simple taxes which have low variance across the tax rates. It is better to rely on horizontal system rather than the vertical system. Cascading tax revenues can have a substantial consequence on firms in the economy. This can affect international competitiveness of those sectors of the production which are adversely affected by economy, eventually leading to monetary and nonmonetary loss of the affected economy.Taxation Scenario in India| India is a developing economy and so it is imperative for India to handle its resources more effectively. Several policy instruments can be applied by the government for this effect, one of the most important one among these is revising taxation policies of India to maximize the efficiency of the economy. India’s taxation policy has been depending on indirect taxation for a long time now. Before tax reforms of nineties, major part of government’s tax revenues came from indirect taxes. The underlying logic for this was that India, being a country with high poverty and large income divide couldn’t afford to widen the scope of direct taxes without putting excessive load on the poorer section of the society. There were also many practical difficulties involved as for majority of population agricultural income was their main income.
About the taxation structure in India, the responsibility for the computation; levy as well as collection of most the taxes in the...