Post 1st July 2017, when the GST is implemented, there will be a Single Indirect Tax system PAN India and because of its simplified and uniform approach, there is surely going to be a more positive impact of GST on warehousing in India.
The companies will be able to take rebate on all types of business transactions whether it is inter-state or intra-state and be competitive in their industry. Since, there will be a single level playing field for all companies, the expectations from the Logistics Service Partner (LSP) for robust Warehouse & Transportation services will increase.
Impact on Warehousing
Currently, the companies opt for multiple warehouses PAN India. The idea behind this is to save on inter-State Sales tax by transferring goods from one location to another, reflecting it as Stock transfer movement and take rebate to reduce product costs. This resulted in higher daily warehouse operating costs and also higher transportation costs.
With implementation of GST the local state taxes will be eliminated and there will be single tax applicable across the entire country. This will enable the companies to achieve cost efficiency in their operations and the benefit of it will ultimately be passed on to the end consumer in the supply chain.
Cost of warehousing operations will decline once the GST comes into play
Restructuring of warehouses as per location
At the moment, location is the most critical factor of consideration when leasing warehousing space, then comes the cost of leasing the real estate space in a particular state/city.
Post GST since the operating costs will decrease, companies will consolidate their smaller warehouse facilities into larger ones and expand around the crucial consumption centres.
Post the implementation of the GST, most warehousing occupiers are expected to take decisions purely on the basis of reach to market, quality and size requirements.
In a nutshell, advantages on warehousing with respect to GST is that consolidation of stock at the warehouses, improves demand planning and inventory management.
While all this looks rosy, the major challenge the companies would face is transportation and deliveries across a bigger geography. With lesser number of warehouses, the location of warehouses and their transportation networks would eventually turn out to be critical. This demands for better connectivity, technology and management. Thus making it critical to have a stringent planning to build an efficient and advanced supply chain model.
Jal Supply Chain Solutions, being pioneers in Warehousing and Transportation service as well as Warehouse Project Consultancy can support you in seamless implementation of advanced and sustainable supply chain processes post the implementation of GST.
Moreover, we have entered into a strategic partnership with Mr. Abitabh Khemka (a member of ‘Working Group on GST’, a sub-group of the Empowered Committee of State Finance Ministers) pertaining to providing sustainable Warehousing and Transportation GST consulting services to our clients.