Impact of GST on supply chain management

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by Admin  20   Feb, 2019

Impact of GST on supply chain management

By replacing all the indirect taxes levied by the government of India, GST made its grand entry on July 1, 2017. The bill was passed in the parliament, much to everyone’s delight, on March 29, 2017. Since GST was one of the many colossal reforms in the history of India’s fiscal policies, it has influenced the supply chain management tremendously. The application of GST has gotten rid of the numerous and diverse indirect taxes that were previously levied on any good or service in different states. The diverse pre-GST central and state taxes (VAT, local body tax, Octroi and entry tax, excise duty, service tax etc) that have been replaced were as burdensome as exporting them abroad as businesses reported these tax structures to be dreadful and complicated.

Pre-GST phase: Before GST was a thing, the goods that needed to be transported from one state to the other would take an alarmingly long period of time just to cross state borders. This was due to the long and tedious process of entry-level taxes that acted as barriers before entering any states, creating a delay for transporters and impeding them at state borders for days together. Different states levied distinct mixes of taxes which compelled businesses to have a one-on-one with the respective state’s local body authorities for the indispensable permits. They started avoiding the sale of goods from one state to the other altogether and concentrated more on intra-state sales only. This was a huge loss of profits for businesses that wanted to evolve all over the country.

Post-GST phase: GST has tried to remove all of the previously existing complications that were evident in the pre-GST taxation policies. It expedited the operations of the business and made it more efficient and effective for them. Inter-state tax collecting checkpoints were discarded and one of the most aggravating obstacles of delay in transportation was discontinued. This saves both cost and time of the businesses. This also means that companies can transport a lesser amount of inventory and facilitate the same amount of sales as earlier. Businesses can now save on its inventory carrying costs. Real estate cost savings is another advantage that GST indirectly brings for the country. Since the quantity of goods needed to be transported has come down, the need for huge warehousing spaces has also reduced.

Source: India warehousing market report 2018.