Restructure your warehousing strategy under GST.

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Restructure your warehousing strategy under GST

GST will transform India one unified common market and allow smooth flow of goods and services. GST will eliminate the tax on tax culture and allow you to avail input tax credit during each outward supply of goods and services. In present tax structure companies will subject to Central Sales Tax (CST) in another state for sale of goods. CST is counted to be non-creditable for distributors and it becomes a part of the cost of the supply chain and also consumes the margins either of distributors or the company.

Earlier the companies setup their warehouses by considering financial aspect but with the arrival of GST the requirement of having warehouses in each state where the company have the business is no longer a necessity. This is the time for the companies to redesigning their warehousing strategy and can operate with few mother houses and small hubs driven by the strategy of logistics cost, just-in-time delivery, reduce cost of goods sold, reduce time to market. Regions like Himachal Pradesh and Uttaranchal, which offer tax holidays and other incentives will not be applicable post GST and the industries which encourages imports have to rethink as import will attract the rate of IGST.

These benefits come with additional compliance cost through a requirement of taking credits and paying taxes, maintaining records and filing returns at each warehouse. The utmost advice for a businessman would be not to make a supply chain just fast and cost effective but flexible and adaptable too. The time left for the GST application (Parliament’s winter session) can be utilized by the companies in reworking the supply chain to help derive the maximum benefit- operationally as well as financially.

Digging more stats about the problem of warehousing, one must clearly know that distribution cost accounts to 2-7 percent of turnover for FMCG. With the uniformity of GST, the neutralizing of tax on local and state market will rejig the warehouse locations. This will lead to India emerging as the single largest common market.

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