The ever growing Indian economy has seen many changes in its policies. With the introduction of Goods and Services Tax (GST) India is all set to go through another change with the integration of various federal and state tax initiatives under a simplified and centralised tax.

Could you tell us a little bit more about the GST in India? What changes will be seen due to this unified tax structure?
The GST is a broad-based, single comprehensive tax levied on goods and services consumed in an economy. GST is levied at every stage of the productiondistribution chain, with the applicable set-offs in respect of the tax remitted at previous stages. It is basically a tax on final consumption.

The current status quo in India sees a cost advantage over other countries. This is seen in its low labour costs and low cost of overall production. However, the growth of the industry is being hampered due to the complex and often confusing tax structure prevailing in different states across the country. The GST will remove the illeffects of the current indirect tax regime prevalent in the country. This system is basically designed to simplify the current indirect tax system. It integrates the union excise duties, customs duties, service tax and State VAT into a single levy known as GST.

If adopted and implemented, GST may neutralise the existing problem of taxes being levied on top of other taxes. In the GST system, both Central and State taxes may be collected at the point of sale. Both components (the Central and State GST) may be charged on the manufacturing cost. GST, being a single unified tax on both goods and services, with the objective of eliminating tax cascades, will bring about a transition from the existing origin-based to a destination-based tax regime.

The introduction of GST is a positive step and will significantly reduce the transaction costs currently incurred by virtually all sectors and industries. It will reduce the cascading effect and pave the way for competitiveness in goods and services. The proposed taxation will eradicate all the existing small tax windows, lead to seamless travel of products from one state to the other and help to assign the right value to products. Distribution-intensive companies can take another look at their supply chain structure and gear up for the proposed tax reforms, to align their supply chain distribution networks to customer markets, moving away from tax issues.

GST will also play an important role in the growth of the organised warehousing business in India. The implementation of GST will be a step in the right direction as it will incentivise logistics companies and 3PL (third-party logistics) service providers to invest in scale, service focus and technology and align their service offering to the widely changing supply chains of their customers. In addition to this, transportation will consolidate around the larger regional and strategic locations, improving fleet availability, quality, competitive opportunities of co-loading vehicles and opening a new commercial framework for healthcare distribution. Further, GST will make large regional warehouses economically viable as opposed to multiple small ones set up to deal with the current tax structure.

While the implementation of GST is a welcome step, it is important to ensure a smooth transition to the new regime to avoid transitional losses to trade and industries.



Do you think the move to implement GST is a good one? If so, why?
The introduction of GST on time is a positive step and will significantly reduce transaction costs currently incurred by virtually all sectors and industries.

Its implementation will be a significant turning point for the logistics market in India. Demand will skyrocket and the costs of entering the market for foreign companies will fall significantly, as the footprint needed will shrink. The need for time-and day definite secure services will explode, and this will drive the maturing of the India market and the consolidation of the logistics sector.

The current tangled web of national, state and local taxes discourages the development of national distribution systems in India and GST would enable shippers to implement more modern warehousing and supply chain solutions, helping drive domestic and international trade.

An effective GST would push up the countryís growth rate by an additional 2ñ2.5 per cent and drive exports 10-14 per cent, by eliminating barriers to trade.

GST would enable shippers to migrate from inefficient systems. By operating from just four or five distribution centres covering the whole country, tremendous savings would be generated if intermodal infrastructure was also built up. You could reduce stock levels drastically and optimise management. Quality will rise, there will be fewer damages and other costsóthe supply chain management business will be simpler.

Currently, a central sales tax (CST) is levied on the inter-state sale transactions of goods. As a result, it usually makes financial sense to maintain separate inventories in each Indian state to avoid inter-state taxes, despite the extra costs this loads onto supply chains. The widespread use of tax concessions further skews the market.

The development of supply chains is currently driven more by tax savings than by logistics efficiency, driving up transport and warehousing costs. With the abolition of CST, trade boundaries between states will not exist and companies can consolidate supply chains. This could really see hub and spoke strategies take off, focused on central locations such as Nagpur.

The implementation of GST will see a greater growth opportunity in India, provided it is implemented at the right time and measures taken to ease the transitional process.

What steps do you think retailers in India should take to tackle the GST?
It is believed that traders, including retailers, would be among the biggest beneficiaries of this harmonised system of taxation. However, there are also transitional issues that will have to be faced. Firms will also have to look at the timing of supply contracts they enter into, to check if these cover the period of the transition from one rate to another. Accountants will also have to double check how any change applies on their accounting software.

How will this new tax structure impact the end consumer?
The proposed taxation will eradicate all the existing small tax windows. This will result in a reduction in the cost of doing business. This in turn will see a reduction in the prices of commodities in the long run as manufacturers and distributors would pass on the benefits of the lower costs to the consumers. Thus, GST promises to have a positive impact on customers and other stakeholders, provided the transition is smooth and well prepared for.