The Indian tax system has been a series of complex state taxes based on the origin of goods and a central tax levied depending upon the destination of the goods. Different states had different tax rates that they levied under their control, and the intricate web created strange incentives for companies, ones that seemed very suboptimal from the perspective of the supply chain. With the implementation of GST (The Goods and Services Tax) from 1st July 2017, businesses across the country began feeling its impact. Since the GST subsumed all other taxes collected by the central and state government in India, the reforms were extensive. Their impact too is comprehensive and is expected to continue well in the future.
Impact of GST on Supply Chain
Like all other industries, the impact of GST on supply chain management has also brought some major changes in the way these domains operate, as well as their bookkeeping activities. Let’s study the impact GST has on Supply Chain.
Customisation of Supply Chain
With the implementation of GST, manufacturers have shifted towards tailored supply chain models as per customer requirements. The removal of stock transfer benefits has helped in increasing the share of direct dispatches for medium and large-sized dealers. A supply chain management online certification can be an effective runway towards successful customization of supply chain management.
Superior Inventory Management
After the elimination of multiple state-level taxes, the stock points optimised and reduced the channel inventories. Now there are few transits stays and this helps in advancing lead times and also reduces inventory levels at stocking points. With more potential for consolidation, warehouse management has also become more efficient. To better understand the impact on superior inventory management, a supply chain management online course can be immensely helpful.
A Decrease in Incoming Logistics Costs
The impact of GST can also be seen on direct out of the state procurements and logistics costs. This has helped the manufacturers to expand their vendor based outside state boundaries and alter the sourcing models profitability.
Cash Flow Management for Export Businesses
Due to GST, the tax exclusion benefits have continued with minimum effect on the bottom line of the economy and a streamlined tax system in place has promoted more exports.
Modified After-sales Distribution Models
GST implementation has significantly affected the spares market due to an increased need for storage and retail penetration. With modified after-sales distribution models, progressive businesses have developed their distribution footprint while also offering high-quality service at lower costs.
Overall, the logistics and supply chain management industry have been touted as one of the primary beneficiaries of GST implementation. To begin with, there are more compliance and adjustment costs because the frequency of filing returns has increased for businesses. Further, to claim the input tax credit, compliance is expected from every single party across the value chain. This has hurt the profitability of the industry in the short-run, but in the long-run, operational efficiency is bound to enhance. To further enhance your supply chain management skills, a supply chain management online certification aims to equip participants with the required depth and balance of technical and managerial competencies to succeed in this domain.