GOODS & SERVICES TAX (INDIA) - IMPACT ON SUPPLY CHAIN MANAGEMENT

1. JAI KUMAR
CHORARIA
GST
IMPACT ON SUPPLY CHAIN
MANAGEMENT

2. SUPPLY CHAIN MANAGERS
BALANCE TOTAL LOGISTICS COST FACTORS
AGAINST
CUSTOMER SERVICE FACTORS

3. STRATEGIC
TACTICAL
OPERATIONAL
Procurement Manufacturing Distribution Logistics
Supply Chain Planning Decisions

4. 5
1. Intrinsic to the Organisation
2. Market Specific Forces
3. Fiscal in nature
SUPPLY CHAIN IS IMPACTED BY SEVERAL
FORCES :

5.  Sale of Consumables within a state – How to minimise tax
liability.
 How to procure Raw Materials, Packing Material, Consumables in
a most tax effective manner to reduce Landed Cost
 How to maximise Post Tax Return
 How to maximise Value Addition in Supply Chain
DRIVING FACTORS OF SUPPLY CHAIN

6.  Increased International Competition.
 Larger Revenue required for physical & social infrastructure.
 Accelerated Economic Growth is possible only in Conducive Tax
Environment.
TAX REFORMS IMPERATIVE FOR
COMPETITIVENESS & GROWTH
Previous complex multiple tax structure not
conducive for growth and competitiveness.

7. TAX EFFECTIVE SUPPLY CHAIN
It is the integration of tax planning into business and
value chain restructurings that may involve the
relocation of assets, functions and risks across
jurisdictions.
Increased profit after tax and therefore shareholder
return above the line
Improved supply chain management accessed
through the creation of centrally controlled strategic
and tactical operations.
An ability to leverage procurement scale.
 Improved tax risk management

8. 1. TRANSIT TIME
 The GST will help reduce the transit time for cargo
 Border check posts will phase out resulting in improvement in operational
efficiency
 Quicker and increased number of deliveries along with reduction in logistic cost
during the transit
 As per world bank estimation Indian corporates can save up to 30-40% of
logistic costs incurred due to stoppages at various tolls and check posts.
 A 2015 joint report by the Transport Corporation of India and the Indian Institute
of Management – Calcutta (TCI-IIM-C) shows that the stoppage expense (average
expense incurred due to the stops along the way such as check-posts and customs)
per tonne-km has increased from ₹0.16 per tonne- km to ₹0.28, a 75 per cent
increase between 2011-12 and 2014-15.
 The taxation by State authorities at checkpoints is one of the main reasons for
this rise in cost. This will come down and should further increase the speed of
cargo movement.

9. 2. WAREHOUSING
 Logistics companies in India, until now, have been
maintaining multiple warehouses across the states to
avoid the Central Sales Tax (CST).
 They would then avoid CST and simultaneously avail
input credit obtained through value-added tax.
 Most of these warehouses are operating inefficiently and
certainly not to their full potential.
 India is now becoming one single market wherein goods can
move freely inter-state without any levy, these obstacles will
be taken care of.
Before GST, goods would incur 2% CST when they are
manufactured in one state and sold in another. To avoid this
industries would transfer goods to warehouses set up in each
state from where the sales could be made.

11. 3. OPERATIONS COSTS
 Until recently, each of India’s 29 states taxed goods that
moved across their borders at different rates apart from
that, Corporate state tax of 2% was levied for inter-state
goods transfer. This is the Pre-GST tax structure.

12.  No varying tax structures are allowed across states under
GST.
 Interstate taxation had resulted in a large number of
unorganized players in this industry. Thus, resulting in
fragmented industry.
 With the introduction of GST, there is likely to be major
consolidation in the industry.
 It could see the emergence of major large players who
can span the entire logistics chain.

13. OBJECTIVES OF TAX BASED SCM
Increased profit after tax and therefore shareholder return
above the line.
Improved supply chain management accessed through the
creation of centrally controlled strategic and tactical
operations.
An ability to leverage procurement scale.
Improved tax risk management.
Aligning Tax and Business considerations across the supply
chain.
To enable the companies to evalute, design and implement
changes to their Supply Chain that integrates Tax with
Business Objects.
To ensure Tax enhanced operational benefits and to reduce
overall risk profile.

14. INTEGRATION OF TAXES INTO GST
Central Taxes
- Excise duty
- Service tax
- CVD
- CST
- Various Cess
- Addl Customs Duty
State Taxes
- State VAT
- State Excise
- Luxury tax
- Entertainment tax
- Entry tax

15. GST IMPACT ANALYSIS
GST
SUPPLY
CHAIN
CASH
FLOW
TEXT
BOX
IT
SYSTEMS
FISCAL
IMPACT

16. 22
SUPPLY CHAIN IMPACT
INTERSTATE SOURCING OF
RAW MATERIALS
PRICE NEGOTITATIONS
IMPROVEMENT IN QUALITY
BETTER FORECASTING
IMPROVED INVENTORY
MANAGEMENT
BETTER TRADE-OFF BETWEEN
COST & CUSTOMER SERVICES
CAPACITY EXPANSION
GREATER FLEXIBILITY IN
MANUFACTURING

17. CHALLENGES AHEAD
– CREDIT DETERMINATION ON INVENTORY
– CREDIT IN RESPECT OF SEVICE TAX ON
LOGISTICS SERVICES

18. SPECIAL UNIT IN
THE STATE OF
MAHARASHTRA

19. CST/VAT
41 CR
SALES
1000
CR
80%
INTER
20%
INTRA
PRE GST-REGIME

20. GST
18CR
SALES
1000
CR
80%
INTER
20%
INTRA
POST GST-REGIME

21. CONCLUSION
• The impact or rather the opportunity is huge for both the
logistic company and their customers to completely relook at
their supply chain.
• This essentially means a significant opportunity for Logistics
companies in India to revise their infrastructure to deliver as well
as reverse logistics for spares and replacements.
• GST is a Win Win solution for all stakeholders.
• It is a key enabler for increasing prosperity.

22. 31
Thank
You