Impact of Gst on Supply Chain
GST: Impact on Supply Chain
Why have the hilly states, Himachal Pradesh and Uttarakhand, witnessed sprawling investments from the industries? What dissuades setting up of manufacturing and distribution centres within municipal boundaries of Maharashtra? Why do leading FMCG companies have as many as 20 warehouses across country when they need only 5 or 6?
The supply chain and its efficiency are of tremendous significance in this competitive market scenario. There are several forces which impact a supply chain: some intrinsic to the organization, some market specific and others fiscal in nature. The fiscal costs have thus remained a key determinant of supply chain designs in India with manufacturing bases and distribution networks designed to garner fiscal benefits. Availability of tax exemptions/deferrals and the differential tax considerations across various geographical locations have played vital role in structuring of supply chains, procurement patterns and distribution networks.
The excise tax holidays for long periods attract heavy investments from industry in states like Himachal Pradesh (Baddi) and Uttarakhand. Octroi in Maharashtra discourages manufacturers to set up factories and distribution centres in municipal boundaries where tax applies. To avoid the Central Sales Tax (CST) on inter-state sales, companies set up depots in each destination state. The CST doesn’t recognize the input tax credits and thus, inter-state sales without the indirect route turn out costlier.
The dual Goods and Service Tax (GST) aims to address such fallacies of India’s taxation regime. It would transform the existing origin based taxation regime to a destination based taxation regime. Introduction of dual GST is expected to remove the cascading effect of taxes by moving to a common tax base and subsuming various Central and State level levies into Central Goods and Services Tax (‘CGST’) and State Goods and Services Tax (‘SGST’). Clearly, this would require re-work on
Why have the hilly states, Himachal Pradesh and Uttarakhand, witnessed sprawling investments from the industries? What dissuades setting up of manufacturing and distribution centres within municipal boundaries of Maharashtra? Why do leading FMCG companies have as many as 20 warehouses across country when they need only 5 or 6?
The supply chain and its efficiency are of tremendous significance in this competitive market scenario. There are several forces which impact a supply chain: some intrinsic to the organization, some market specific and others fiscal in nature. The fiscal costs have thus remained a key determinant of supply chain designs in India with manufacturing bases and distribution networks designed to garner fiscal benefits. Availability of tax exemptions/deferrals and the differential tax considerations across various geographical locations have played vital role in structuring of supply chains, procurement patterns and distribution networks.
The excise tax holidays for long periods attract heavy investments from industry in states like Himachal Pradesh (Baddi) and Uttarakhand. Octroi in Maharashtra discourages manufacturers to set up factories and distribution centres in municipal boundaries where tax applies. To avoid the Central Sales Tax (CST) on inter-state sales, companies set up depots in each destination state. The CST doesn’t recognize the input tax credits and thus, inter-state sales without the indirect route turn out costlier.
The dual Goods and Service Tax (GST) aims to address such fallacies of India’s taxation regime. It would transform the existing origin based taxation regime to a destination based taxation regime. Introduction of dual GST is expected to remove the cascading effect of taxes by moving to a common tax base and subsuming various Central and State level levies into Central Goods and Services Tax (‘CGST’) and State Goods and Services Tax (‘SGST’). Clearly, this would require re-work on
References: * Business Standard Columns * Technopak Perspective: GST Impact on Supply Chain * www.goodsandservicetax.in