This document provides a report on the impacts of GST and infrastructural preparedness for Shree Cement Ltd. It begins with an introduction and overview of the present tax structure compared to the proposed GST structure. Key points of comparison include the taxes subsumed under GST, place of taxation, tax base, and powers to levy taxes. The report then outlines the proposed registration process, return filing requirements, payment methods, and refund process under GST. It also provides a framework to calculate a tax neutral rate for Shree Cement and models for optimizing their distribution centers in light of GST. The report concludes with recommendations regarding required changes to IT systems.

1. REPORT
ON
IMPACTS OF GST
AND
INFRASTRUCTURAL PREPAREDNESS
OF SHREE CEMENT LTD.
New Delhi
May, 2016
Submitted by
Raparthi Srinikith,
Rao Ashish Dayashankar,
Summer Interns IIM Rohtak
To Shree Cement Ltd.

2. INDEX
Contents Page No.
1. Introduction ..............................................................................................................................1
2. Present Tax structure and GST structure .................................................................................1
2.1 Taxes to be subsumed in GST ....................................................................................2
2.2 Taxes not to be subsumed in GST................................................................................2
2.3 Present and GST structure comparison table ..............................................................2
3. Registration, Return Filing, Payment and Refund Process.........................................................6
3.1 Compliances under GST registration ..........................................................................6
3.2 Compliances under returns in GST regime ..................................................................6
3.3 Compliances under GST payments ..............................................................................7
3.4 Compliances under GST refunds .................................................................................7
4. Tax Neutral Rate of SCL ............................................................................................................8
4.1 State Levied Tax (SLT) ................................................................................................8
4.2 Weighted Average Rate of State levies (WAR)............................................................8
4.3 Cascading Factor (CF) .................................................................................................8
4.4 Effective State Levies Tax (ESLT) ..............................................................................9
4.5 Effective Centre Levied Tax (ECLT) ..........................................................................9
4.6 Service Tax Apportionment ........................................................................................10
4.7 Sales and Service Value ..............................................................................................10
4.8 Framework of Tax Neutral rate or Break-even Rate ..................................................10
4.9 Arriving at Tax Neutral Rate or breakeven rate of SCL..............................................11
5. Model for optimization of distribution centers .........................................................................11
5.1 Methodology ...............................................................................................................12
5.2 Concept used ...............................................................................................................12
5.3 Effective Distance.......................................................................................................13
5.4 Conclusions drawn from the illustrations …………………………………………...15
6. Infrastructural Changes in IT system………………………………………………………….15
7. Appendix 1: FY15-16 Tax data of SCL …………....………………….………. (Not disclosed)
8. Appendix 2: Calculation of Tax Neutral Rate for SCL…………….…………... (Not disclosed)
9. References …………………………………………………………………………………….16

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Report on Impacts of GST And Infrastructural Preparedness of Shree Cement Ltd.
Raparthi Srinikith1, Rao Ashish Dayashankar2
1 PGDM, Indian Institute of Management Rohtak, Haryana, India.
2 PGDM, Indian Institute of Management Rohtak, Haryana, India.
1. INTRODUCTION
Implementation of Goods and Service Tax (GST) in India will have a major impact on the Indian
economy. Businesses will experience a change in the tax structure, tax compliances and the
monetary value of taxes paid, which will impact the product pricing and ultimately the
profitability. Analysing the change therefore is very crucial for businesses to make a smooth
transition to GST regime.
The report compares and contrasts the present taxation structure to that of GST structure,
suggests the registration procedure, return filing, payment and refund processes after GST
implementation. A framework to arrive at a Tax Neutral Rate for the organization to remain at
par with the present Indirect tax system when the transition takes place is proposed. A model for
efficiently restructuring the Supply Chain footprint of the organization, which takes advantage of
the changes proposed in GST regime, is also proposed resulting in huge cost savings to the
organization.
2. PRESENT TAX STRUCTURE AND GST STRUCTURES
The present indirect tax system grants power to the Central government to levy Custom Duty on
imports and exports, Excise Duty on manufacturing of goods (except alcoholic liquors for human
consumption and opium, Narcotics etc.) and Service Tax on rendering of services. Apart from
this, the residuary taxation powers also lie with the Centre. The States have been granted the
power to levy Excise Duty on Alcoholic liquors for human consumption and opium, Narcotics
etc octroi or entry tax, tax on consumption or sale of electricity, VAT on sale or purchase of
goods (other than on inter-state sales) and luxury tax.
GST is commonly described as indirect, comprehensive, broad based consumption Tax. The
Dual GST which would be implemented in India will subsume many consumption taxes. The
objective is to remove the multiplicity of tax levies thereby reducing the complexity and remove
the effect of Tax Cascading. The objective is to subsume all those taxes that are currently levied
on the sale of goods or provision of services by either Central or State Government.
Subsumption of large number of taxes and other levies will allow free flow of larger pool of tax
credits at both Central and State level.

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2.1 TAXES SUBSUMED UNDER GST
GST would be levied on all the transactions of goods and services made for a consideration. This
new levy would replace almost all of the indirect taxes. In particular, it would replace the
following indirect taxes:
At Central level
 Central Excise Duty (including Additional Duties of Excise)
 Service Tax
 CVD (levied on imports in lieu of Excise duty)
 SACD (levied on imports in lieu of VAT)
 Central Sales Tax
 Excise Duty levied on Medicinal and Toiletries preparations,
 Surcharges and cesses
At State level
 VAT/Sales tax
 Entertainment tax (unless it is levied by the local bodies)
 Luxury Tax
 Taxes on lottery, betting and gambling
 Entry tax not in lieu of Octroi
 Cesses and Surcharges
5.2 TAXES NOT SUBSUMED IN GST
 Basic Custom Duty
 Exports Duty
 Road & Passenger Tax
 Toll Tax, Property Tax
 Stamp Duty
 Electric Duty.
2.3 PRESENT AND GST STRUCTURE COMPARISON TABLE
Sr.
No.
Particulars Present Taxation Proposed GST
1 Structural
Architecture
-Two separate VAT systems operate
simultaneously at two levels, Centre and State,
and tax paid (input tax credit) under one is not
available as set off against the other –Tax on
A dual tax with both Central GST (CGST) &
State GST (SGST) will be levied on the same
base. Thus, all goods and services, barring a
few exceptions, will be brought into then GST

5. 3 | P a g e
services is levied under separate legislation by
Centre, i.e. Finance Act, 1994 which regulates
service tax
-No comprehensive taxation of services at the
State level; few services are taxed under
separate enactments
-Import of goods in India are not subjected to
State VAT
base. There will be no distinction between
goods and services for the purpose of tax with
a common legislation applicable to both It
allows seamless tax credit amongst Excise
Duty, Service Tax & VAT
2
Place of
Taxation
Taxable at the place of manufacture or sale of
goods or rendering of service
It is consumption (destination) based tax
3 Tax Base Comparatively narrow Wider
4 Excise Duty Imposed by Centre under separate Act, Central
Excise Act, 1944. Taxable event is
manufacture; Taxed up to manufacturing point
To be subsumed in CGST; Taxable event will
be sale; To be taxed up to retail level
5 Basic Customs
Duty
Imposed by Centre under separate Act, i.e.,
Customs Act, 1962. Taxable event is import
No change is proposed
6 CVD/SAD Imposed by Centre under separate Act, i.e.,
Customs Act, 1962. Taxable event is import
To be subsumed in CGST; Taxable event will
be import
7 Service Tax Imposed by Centre under separate Act
(Finance Act, 1994). Taxable event is
provision of service
To be subsumed in CGST & SGST; Taxable
event will be provision of service
8 Central Sales
Tax
Imposed by Centre under CST Act, 1956.
Collection assigned to States; Taxable event is
movement of goods from one State to another
Is being phased out
9 State VAT Imposed by States; Taxable event is sale within
the State
To be subsumed in SGST; Taxable event is
sale within State
10 Inter-State
Transactions
Imposed on goods & services by the Centre
(CST, Service Tax)
To be subsumed in GST and subject to SGST
& CGST
11 Tax on
Manufacturing
activity
As Excise Duty by Centre No such powers under GST regime
12 Powers to levy
Tax on Sale of
Goods
Inter-State : Centre
Local : State
Concurrent powers to Centre & State
13 Powers to levy
Tax on
Provision of
Services
Service Tax by Centre Concurrent powers to Centre & State; States
to tax more than 40 services
14 Tax on Import
in India
Goods are taxed to Customs Duty (comprises
Basic Customs Duty, CVD & SAD); Services
are taxed to Service Tax
-Basic Custom Duty on goods : No Change -
CVD & SAD on import of goods and import
of services : To be subsumed in GST
15 Tax on Export Exempt / Zero-rated No change is proposed

6. 4 | P a g e
of Goods &
Services
16 Tax on inter-
State Transfer
of Goods to
Branch /
Depot or
Agent
Exempt against Form F Will be taxable
17 Tax on
Transfer of
Goods to
Branch or
Agent within
States
Generally exempt but depends upon State
procedures
May not be taxable
18 Cross-Levy
set-off/
adjustment
Excise duty and Service tax : Cross set off
allowed
No cross set-off between CGST and SGST
will be allowed
19 Cascading
Effect
Allows CENVAT tax credit between Excise
Duty & Service Tax, but not with VAT(cross
set off is not allowed)
Allows seamless tax credit amongst Excise
Duty, Service Tax & VAT
20 Non-
Creditable
Goods
Do exist May exist depending upon negative
list/exemptions etc.
21 Credit on
Inputs used for
Exempted
Activities
Not allowed May not be allowed
22 Various
Exemptions -
Excise Free
Zone or VAT
Exemption
Available May be phased out
23 Exemption for
transit Inter-
State Sale and
High Seas Sale
Available May be taxable
24 Transactions
against
Declaration
Forms
Allowed under the CST / VAT Forms likely to be abolished
25 Taxation on
Govt. and
Partially taxed May not change much

7. 5 | P a g e
Non-Profit
Public Bodies
26 Stamp Duty Presently taxed concurrently by the Centre and
State
Status not clear; If subsumed under GST, big
relief to real estate industry : to claim input
tax
27 Excise Duty
Threshold
Limit
Presently Rs 1.5 crores Rs.10 lacs to 20 lacs (Turnover of Rs 1.5
crores & above may be administered by
Centre and less than Rs 1.5 crores may be
administered by States)
28 VAT
Threshold
Limit
Presently, Rs 5 lacs to 10 lacs May be Rs 10 lacs to Rs 20 lacs
29 Service Tax
Threshold
Limit
Rs 10 lacs May be Rs 10 lacs to Rs 20 lacs
30 Classification
of
Commodities
Excise Duty based on HSN VAT not
applicable
Likely to be based on HSN
31 VAT/GST
Registration
Number
Simple TIN (some States : PAN only based) PAN based
32 Procedures for
Collection of
Tax and Filing
of Return
For Central Excise & Service Tax, it is
uniform. For VAT, it varies from State to State
Likely to be uniform
33 Tax
Administration
Complex due to number of taxes Likely to be simple and easy, tax friendly
34 Use of
Computer
Network
Just started by the States; very minimum;
Central taxes are online
Extensive; It will be pre-requisite for
implementation of GST
35 Nature of
Present
Litigations
- Sale or Service
-Classification of goods
-Interpretational issues
-Sale or works contract
-Valuation of composite transactions, etc.
- Exemptions- Suppression/ limitation
Likely to be reduced provided GST
legislations are properly drafted

8. 6 | P a g e
3. REGISTRATION, RETURN FILING, PAYMENT AND REFUND PROCESS
The Joint Committee constituted by the Empowered Committee of State Finance Ministers has
made suitable recommendations for certain processes under GST, such as Registration, Return,
Payment, Refund process.
3.1 Compliances under GST Registration
The report of Joint Committee on GST Registration suggests the following procedure for
migration of the existing registrants either with the Centre or State or both as follows-
1. All existing registered entities, whether with the Centre or State under any of the tax statues
being subsumed in GST, would be allotted a GST registration number called Goods and Services
Tax Identification Number (GSTIN) on voluntary basis.
2. At present, tax payers are separately registered with State and/ or with Central tax
administrations or with both based on their business activity. In the GST regime, a taxpayer will
have to obtain State wise registration. Even within a State, the taxpayer may either opt for a
single registration or multiple registrations for different business verticals.
3. For Taxpayers Registered under State VAT/Excise
i. GSTIN will be generated by NSDL in case of all VAT TINs where PAN has been validated.
Along with a password the GSTIN will be sent to respective State Tax Authorities.
ii. State tax authorities will communicate the GSTIN/password to taxpayers, with instruction to
log on the GST portal and fill up the remaining data. State specific data over and above what is
contained in the GST Registration Form can be collected after GST registration becomes
operational.
Tax authorities will communicate therefore, the GSTIN and password details with instructions to
log on to the GST portal from which return filing and payment of taxes can be done after
providing the additional required data after logging in.
3.2 Compliances under returns in GST regime
Every registered assesse will be required to file returns (including NIL returns). It is pertinent to
note that there could be as many as 8 returns as under:
Type of Return
as per return
report
Description Due date of filing
GSTR 1 Outward supplies made by taxpayer 10th of the succeeding
month

9. 7 | P a g e
GSTR 2 Inward supplies made by taxpayer 15th of the succeeding
month
GSTR 3 Monthly return (inward supplies +
outward supplies)
20th of the succeeding
month
GSTR 7 Return for Tax Deducted at Source 10th of succeeding month
GSTR 8 Annual Return By 31st December of next
FY
The return (including NIL return) filing formalities may increase by manifolds as far as
periodicity, number of forms and multiplicity of compliances are concerned. Compliance
requirement may further become cumbersome as invoice level details are expected to be
provided in the returns. For example, a service taxpayer, covered by the Central Service Tax
legislation, is currently required to file half yearly return and within the GST regime, same
Service Tax assesse might be required to file as many as 61 returns (5 returns per month i.e.
GSTR 1, 2,3,6,7 and GSTR 8 annual return).
3.3 Compliances under GST Payments
Payments of CGST, SGST, IGST and Additional Tax are required to be done through internet
banking. For making e-payment of GST taxpayer will be required to access Goods and Services
Tax Network (GSTN) for generation of the Challan where basic details (such as name, address,
email, mobile number, and GST registration number) of the tax payer will be auto populated in
the challan. Once the taxpayer chooses a particular bank for payment of taxes, GSTN will direct
him to the website of the selected bank wherein taxpayer will make the payment using the USER
ID and Password provided by the bank to enter into the secured e-banking area of his bank. In
the challan the taxpayer will have to use separate accounting codes for making payment of
CGST, SGST, IGST or Additional Tax. Further, accounting codes will also be provided for
interest, penalty, fees or others payments.
3.4 Compliances under GST refunds
Tax payers can claim refund of GST paid under situations such as exports, excess payment by
mistake, refund of pre-deposit, refund to international tourists etc. For export of goods, the report
suggests that the exporter should procure the goods on payment of appropriate GST and then
claim refund of the same from respective Governments. It is also recommended that the option to
procure duty free inputs for exported goods should not be available in the GST regime. As
regards, deemed exports, the report suggests that deemed exports should be treated at par with
exports. The report also suggests that refund form should be electronic format and refunds
should be granted in a time bound manner and delay in processing of refund should enable
assesse claim refund for such delay. The Committee recommends that the rate of interest in case
of refund may be around 6% and that in case of default in payment of interest may be around
18%

10. 8 | P a g e
4. TAX NEUTRAL RATE FRAMEWORK
Tax neutral rate is the GST rate at which the organization will be at par with the taxes being paid
currently in the present regime to that of the GST regime. To arrive at the tax neutral rate or the
break-even rate of the company in GST regime, the following framework is set considering all
the aspects of changes that are deemed to take place after GST implementation.
4.1 States Levied Tax (SLT)
The total monetary value of taxes paid to the state governments in the present Indirect tax regime
from here on will be referred to as States Levied Tax (SLT). SLT includes the sum total of all
the output taxes being paid to the state governments which include Value Added Taxes, Central
Sales Taxes and Entry Taxes for all the seventeen states of operation.
SLT = ∑ VAT + CST + ET
𝑎𝑙𝑙 𝑠𝑡𝑎𝑡𝑒𝑠
The sum total of value added taxes include the intrastate sales value inclusive of excise duty for
all states of operation, charged at a respective rate of VAT levied by the states. This sum total
represents total volume VAT paid to the state governments in the present regime.
The sum total of central sales taxes include the interstate sales value inclusive of excise duty for
each state of operation, charged respectively at full rate of CST or concessional rate which is
availed against C-Form submission. This sum total represents total volume of CST paid to the
state governments in the present regime.
The sum total of Entry taxes represents the total volume of entry taxes paid to the state
governments which levy entry tax upon the movement of goods and commodities from one
territory to another.
4.2 Weighted Average Rate of State Levies (WAR)
Weighted Average Rate (WAR) of State Levies is the percentage of SLT on Sales value
inclusive of excise duty.
WAR = SLT
Sales inclusive of Excise Duty⁄
This weighted average rate charged on Sales inclusive of Excise Duty will give the value of SLT
i.e. the total amount of taxes being paid to the states in the form of VAT, CST and Entry Tax.
WAR is the key figure which is used in the calculation of cascading factor.
4.3 Cascading Factor (CF)
Cascading Factor is the weighted average rate of state levies (WAR) which is taxed on Excise
Duty. This factor signifies the tax on tax volume paid to the government which must be deducted
from SLT as there will be no tax cascading effect after GST implementation.

11. 9 | P a g e
CF = Excise Duty ∗ WAR
This is the volume of taxes which the final consumers will be saving as there will be no burden
of tax cascading effect in the GST regime.
4.4 Effective States Levied Tax (ESLT)
Effective States Levied Tax is defined as the effective volume of taxes which will be paid to the
State governments on goods in GST regime. All the factors of change from the present taxation
regime to the GST regime are to be considered to arrive at this value.
ESLT = SLT − CF − Input tax on Interstate purchases − ITC reversal
There will be no Cascading effects post the implementation of GST, so the Cascading Factor
must be deducted from SLT.
Present Indirect tax system does not give credit on the input taxes being paid on the interstate
purchases which the GST system does provide, effectively lessening the tax burden by the
amount of input CST paid on interstate purchases, so the input taxes paid on interstate purchases
must be deducted from SLT.
The concept of ITC Reversal is null and void in the GST regime. The full value of input taxes
paid will be available as ITC to the businesses without the deductions of reverse ITC effectively
lessening the tax burden by the same volume. So the ITC reversal amount must be deducted from
the SLT.
Thus by deducting CF, input tax paid on interstate purchases and the ITC reversal amount from
the SLT will give the value of Effective States Levied Tax (ESLT).
4.5 Effective Centre Levied Tax (ECLT)
Effective Centre Levied Tax is defined as the effective volume of tax which will be paid to the
Central Government on goods in the GST regime. Excise duty less CENVAT credit availed on
service tax is considered as a major part of ECLT. Service tax CENVAT credit is deducted from
excise duty because ECLT by definition is defined only on goods. Service tax CENVAT utilized
is therefore accounted solely under Service Tax.
ECLT = Excise Duty − Service Tax CENVAT credit + NON CENVATABLE Cesses
NON CENVATABLE Cesses = Custom E Cess + Custom S&H Cess+ Clean Energy Cess
Cesses on which no CENVAT credit can be claimed in the present regime should also be
included under ECLT as they are not accounted in the Excise duty. These NON CENVATABLE
Cesses include Custom E-Cess, Custom S&H Cess and Clean Energy Cess which are levied on
coal imports.

12. 10 | P a g e
4.6 Service Tax Apportionment
Service tax in the present Indirect tax regime is collected by the Central Government. Post
implementation of GST, both Centre and states have stake on it. Service value charged at CGST
rate will be collected by the Central Government and Service value charged at SGST rate will be
collected by the State Governments. So the Service Tax paid wholly to the Central government
in the present regime is required to be apportioned to the Central and State governments in the
proportions of CGST (X) and SGST (Y) rates respectively.
Service Tax apportioned to Centre = Service Tax ∗ X
X + Y⁄
Service Tax apportioned to States = Service Tax ∗ Y
X + Y⁄
The volume of Service Tax considered includes the input service tax paid for services received
from providers and the output service tax paid for services rendered as a provider. The Service
Tax CENVAT utilized on Excise duty is also accounted in the volume of Service tax considered.
4.7 Sales and Service Value
To arrive at the sales value figure, the assessable value of VAT & CST which is inclusive of
excise duty is considered. Excise duty less Clinker CENVAT is then deducted from the above
assessable value to get the sales value.
Sales Value = Basic Assessable Value of VAT & CST − (Excise Duty − Clinker CENVAT)
Sales and Service Value = Sales Value + Service Value
Clinker CENVAT is deducted from Excise Duty because the Excise duty paid for the
manufacture of clinker in the Integrated Units is utilized when the clinker is transferred to the
Grinding Units thereby nullifying the effect. Summation of Sales value and Services value thus
obtained will give the total Sales and Service Value on which taxes are charged in the GST
regime.
4.8 Framework of Tax Neutral Rate or Breakeven Rate
To arrive at the break even CGST and SGST Rates, the volume of goods and service taxes which
will be paid to the Centre and to the States in the GST regime on Total Sales and Services Value
should be considered.
The below mentioned equations have been framed to arrive at the breakeven CGST and SGST
Rates post the implementation of GST.

13. 11 | P a g e
CGST Rate(X) =
ECLT + Service Tax ∗ X
X + Y⁄
Sales and Services Value
SGST Rate (Y) =
ESLT + Service Tax ∗ Y
X + Y⁄
Sales and Service Value
The numerator part of first equation signifies the effective taxes paid to the Central Government
and the numerator part of second equation signifies the effective taxes paid to State Governments
in the GST regime.
The breakeven CGST and SGST rates can be arrived therefore by solving the above equations
for CGST and SGST Rates.
4.9 Arriving at Tax Neutral Rate or Breakeven Rate of SCL
Data of SCL for the financial year 2015-16 is used in the above framework to arrive at the
following Tax Neutral Rate for SCL
Any rate which is set below the 24.94% rate will give Shree Cement Ltd a tax benefit stand.
Going with 16% which is the committee’s preferred rate, tax benefit up to 9% can therefore be
realized.
5. MODEL FOR OPTIMIZATION OF DISTRIBUTION CENTERS
The present Indirect Tax system allows multiple warehouse strategy which decreases the
interstate movement of goods thereby decreasing the associated tax. Warehouse location thus
currently is not based on logistics consideration but rather is tax saving oriented. In GST regime,
state boundaries are of least concern to the businesses as businesses will be paying the same
volume of taxes for both inter and intrastate transactions.
Thus, post the implementation of GST, the Supply Chain of Shree Cement Ltd. can be
restructured to its operational efficiency, which will eliminate obsolete warehouses which have
been set up to cater the local sales resulting in huge cost savings. The idea is to implement a
distribution configuration which caters to the existing demand at a lower cost. The following
GST Rate (X+Y) = 24.94%
CGST Rate (X) = 13.25%
SGST Rate (Y) = 11.69%

14. 12 | P a g e
model is developed with the above idea to optimize the distribution centers after GST
implementation.
The model developed is implemented on few selected warehouses located in the states of Punjab
and Haryana for illustration purpose and can be extended to all the warehouses which are under
operation currently. Data very close to reality is used in the model for illustration purpose and
does not pertain to the real-time data taken from Shree Cement Ltd. Real-time data of SCL
can therefore be used in this model to arrive at the optimal supply chain configuration and to
know the actual volume of cost savings.
5.1 Methodology
The model considers all the warehouses of a business and the destination points to which these
warehouses supply their finished goods to. It then computes the cost of operation for all the
different configurations of warehouses that are possible and selects a configuration whose cost of
operation is the minimum. Factors that are considered for the calculation of cost of operation are-
 Average monthly sales of all the destination points.
 Distances between warehouses and destination points.
 Secondary Distribution Transportation charges
 Warehouse Maintenance cost
Fixed Cost: Cost that doesn’t depend on the amount of stock handled
Variable Cost: Cost that depends on amount of stock handled
For illustration eleven warehouses and thirty seven destination points are considered and cost is
calculated for all possible configurations which in this case is 2048 (= 2^Number of Warehouses
= 2^11). Warehouses considered are Amritsar, Bhatinda, Rohtak, Rohini, Chandigarh, Hissar,
Karnal, Kaithal, Sirsa, Patiala and Jalandhar.
5.2 Concept Used
The key points that are considered to find the optimal solution are-
 Each destination point’s demand will be fulfilled by the nearest active warehouse.
 Warehouses won’t supply to destination points which are more than 400 kilometers.
 Relating the variable cost with the amount of inventory handled.
 Relating the fixed cost with the status of the warehouse.
 All possible configurations considered = 2 ^ (No. of Warehouses)
 Each configuration results in a different warehouse distribution cluster which affects-
Transportation Cost, Fixed cost and Variable Cost.
These points are then converted into programming logic and Total cost optimizer is framed
which calculates the total cost for every configuration of warehouses possible.

15. 13 | P a g e
Total Cost Optimizer
Value ‘0’ indicates the warehouse is operating and ‘1’ indicates the warehouse is closed.
5.3 Effective Distance
Using the assumption that the warehouses won’t supply demand points more than distance of
400 Kms, Effective distance is defined accordingly which will eliminate distances that are
greater than 400 Kms and also the distances to the destination points from warehouses that are
closed down. Effective distance between all destination points and warehouses determines which
warehouse should supply which destination point to minimize cost. Minimum of the effective
distances from all the warehouses to a destination point then will determine the connectivity
between that destination point and a warehouse.
Once the connectivity is decided, quantity to be supplied by each warehouse and the total
destination points supplied by each warehouse can be easily computed. Then a macro is run to
understand which warehouses if closed will result in the least cost of operation.
Dashboard Matrix developed to eliminate obsolete warehouses.
Value ‘0’ indicates the warehouse is operating and ‘1’ indicates the warehouse is closed.
This matrix considers all warehouse configurations that are possible and calculates the total cost
with change in values of warehouse (0 or 1). The given dashboard is optimising total cost by
optimising combination of fixed cost, variable cost and transportation cost.
Value ‘0’ indicates the warehouse is operating and ‘1’ indicates the warehouse is closed. Eleven
depots are taken for analysis. The model takes the combinations of different warehouses and
computes the total cost for each such configuration. After the application of the analytical model,
Warehouse AMRITSAR BHATINDA (S31)ROHTAK (S15)ROHINI CHANDIGARH HISSAR KARNAL KAITHAL SIRSA PATIALA JALLANDHAR
Value 1 0 1 0 0 0 0 0 0 0 0
Fixed Cost 61762 30629 77484 64115 84240 35723 110490 73408 109642 113323 32484
Effective Fixed 0 30629 0 64115 84240 35723 110490 73408 109642 113323 32484 654054
Rs/MT 82.345 58 93.2 119.645 113.5 50 63.421 71.5 85 66.75 92.3
Total Variable cost 0 1436547.6 0 16089735 2021857.648 414287 1433503 1065231 775510 1051372.9 3502793.094 27790836.61
Total Transport Cost 27693497.9
Total Cost 56138388.51

16. 14 | P a g e
it generates 2048 solutions out of which two best solutions are considered. Table below shows
the most optimal and the second best optimal solution.
Warehouse Present Most Optimal Second Optimal
Amritsar 0 1 1
Bhatinda 0 0 0
Rohtak 0 1 0
Rohini 0 0 0
Chandigarh 0 0 0
Hissar 0 0 0
Karnal 0 0 0
Kaithal 0 0 0
Sirsa 0 0 0
Patiala 0 0 0
Jalandhar 0 0 0
Total Cost
(Rs./Month)
58792794.38 56138388.51 56364531.42
0 indicates that warehouse is operating, 1 indicates that warehouse is closed.
Thus optimal supply chain configuration is obtained by eliminating the warehouses located in
Amritsar and Rohtak, which gives a cost saving of ₹ 2654405.00 per month. Saving opportunity
of ₹ 3.18 Crore can therefore be realized per annum in Punjab and Haryana region alone.
Warehouses are decreased from 11 to 9 thereby decreasing the supply chain complexity.
After GST implementation, the remaining nine warehouses have to handle more tonnage and
demand points than before. Destinations points served by operating warehouse and tonnage
handled by each warehouse for the optimal solution are shown below.
Warehouse Bhatinda Rohini Chandigarh Hissar Karnal Kaithal Sirsa Patiala Jalandhar
Demand
points
Served
3 10 3 2 4 3 2 3 7
Inventory
Handled
(MT)
7484.2 14050.4 2123.15 4624.28 3596.6 6551.93 3334.29 3003.56 1755.8

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Breakup of different costs for the optimal solution are-
In Rupees
Total Fixed Cost 6,54,054
Total Variable Cost 2,77,90,836.61
Total Transport Cost 2,76,93,497.9
Total Cost 5,61,38,388.51
5.4 Conclusions drawn from the illustration
 Cost savings of ₹ 3.18 crore per annum for Punjab and Haryana zone.
 Decreased the number of warehouses from 11 to 9 in Punjab and Haryana regions.
 Reduction in supply chain complexity to a large extent.
 Model if implemented on all warehouses will result in huge cost savings to the company.
This model therefore suggests the infrastructural changes that are required in the supply chain to
maximize the operational efficiency after GST implementation.
6. IT INFRASTRUCTURAL CHANGES
Information Technology is a key area for business organizations, irrespective of the fact whether
the organization is ready or not, on the very first day GST is introduced, the information
technology system of an organization has to be ready and running else it will bring the entire
business to standstill. For businesses having multi-state presence, currently, the IT systems of the
business generate invoice/ bill with applicable respective VAT or CST. In GST regime, the IT
System should generate invoice/ bill with applicable CGST and SGST or IGST and additional
1% tax, if applicable. For services, there could be more challenges as applicability of CGST and
SGST or IGST will depend on the Place of Supply Rules (to determine whether the transaction is
intra-State or Inter-State). Thus, embedding the Place of Supply Rules in the IT system could
pose a major challenge. Given this, to avoid the threat of disruption of business, it is advisable
that early study should be carried out to understand how the systems migration for GST could be
done.

18. 16 | P a g e
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 http://www.mondaq.com/india/x/456858/sales+taxes+VAT+GST/Cost+Of+Compliance+Under+GST
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compliances-proposed-gst-law-india
 http://howtoexportimport.com/Different-Tax-returns-under-GST-Goods-and-Service--2260.aspx
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examples-in-india/
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from http://www.cognizant.ch/InsightsWhitepapers/Indias-Goods-and-Service-Tax-the-Case-for-
Distribution-Network-Redesign.pdf
 ITC Infotech (2012), Looking Ahead – The Big Opportunity for Network Design - GST Introduction in
India. Retrieved from http://www.itcinfotech.com/Uploads/GUI/knowledgecentre/GST_WP_Revised1.pdf
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http://magnivirtus.com/index.php/2015/06/03/gst-the-tax-and-other-greater-implications-for-supply-chain-
networks/
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your-business-Report-1435137397.pdf
 Report of the Joint Committee on Business Process for GST on GST Registration Process
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