GST is one of the greatest reformations in the history of Independent India. It is a major initiative for economic growth and infrastructural development of the nation, ensuring a favorable climate for the business and business operations. All the comprehensive indirect tax levied on manufacturing, sales, and consumption of goods as well as services has been replaced by a single Value-Added Tax, Goods and Service Tax (GST) proposed at the national level, exempting the cascading effect of taxes over the production and supply chain. These changes will encourage the new value chain decisions, redesigning of the supply chain, reduced transportation timing, and consolidation of warehouses that will further help the warehousing and logistics industry attain great heights.
In the month of July’2017, the government of India introduced GST (Goods and Service Tax), a uniform taxation policy aiming to simplify trade tax; created a nation-wide ripple of changes in the market operations. It has a far-reaching impact on manufacturing and other principle industries. GST replaces all the taxes such as central sales tax, state-level sales tax, the octroi, stamp duty, entry tax, telecom license fees, taxes on sales or consumption of power, luxury tax, turnover tax, lottery tax, transportation taxes on goods & services, etcetera. These were levied on the whole process from the production, to storing, to transportation, to the retail end-sale of the product, and to its consumption.
Impact of GST on Manufacturing Industry
The effect of multilayered taxation has hovered upon the manufacturing industries and resulted in a low growth rate. To reduce the tax impact, companies have been motivated for setting up their warehouses in various states, which would help them cut the cost down on various taxes and hence, on the production cost. Manufacturers found the cumulative cost of setting-up warehouses at various places more viable than paying these taxes. It has led to a huge investment in the storage houses or go-downs, which were small and largely unorganized. Hence, such distribution channels had to face a lot of mismanagement and discrepancies in their trade.
With the coming of GST, the manufacturing industries are required to pay an integrated taxation amount, relieving the burden of multiple taxes on state boundaries and retailers. This charts out all the possibilities of the hidden taxes. Now, the backlash of GST is that manufacturers will fail to cut costs of production. Now, any extra charges on products shall be unnecessary. Hence, there is a potential to cut cost for these manufacturing industries. The concerns of the manufacturing industries shall shift to the acute problem of availability of resources, labor, and fast transportation, rather than how to minimize taxes.
Impact of GST on Warehousing & Logistics
Amongst the industries, the warehousing industry has been particularly identified as a major beneficiary of the new tax regime. The warehousing industry plays a major role in the economic growth and can actually prove a catalyst in realizing India’s dream for manufacturing industry and initiative such as ‘Make in India’.
Warehousing and logistics have been an integral part of any business's strategy planning. Following are the ways GST will help aid to Warehousing & Logistics as well as manufacturing industry.
Revision in Supply Chain
The biggest opportunity in the sector is the major expansion of the sales ambit across the country. The new tax regime will accommodate a flexible and leaner sales chain. It would not only annihilate the multiple taxes, mitigating the cascading impact of these taxes, but it will also eliminate inter-state check-posts, ensuring the transportation easier, smoother and credit-free process.
Lower Production Cost
The new taxation policy may increase the consumption of goods if the cost reductions are passed onto the consumers, so consumers will feel they get more bang for the buck!
Better purchasing power.
The manufacturers can now indulge in the bulk procurement of productions inputs. The development in the warehousing will allow and accommodate a large number of stocks efficiently, as warehousing and logistics industries can adopt efficient practice such as bulk-breaking and cross-docking.
Centralized Hub Operations
GST will also alleviate all the miscellaneous concern of the manufacturing industries and can focus on great consumption base across the country. Now, the small warehouses can be clubbed with the big ones to make them more efficient and technology-based warehouses, saving the land area. The manufacturing industries can operate their sales under a central warehouse, rather than various ill-functioning warehouses establishments. Furthermore, this will result in larger and more managed warehouses, better transportation, and increased resource availability.
Hi-Tech Warehousing Handling
With the recent alterations in the taxation policies, the manufacturing industries would rather be motivated to set their own grand warehouses or outsource to the third-party warehouses that are equipped with technology-based systems, closer to their consumer base, easier transportation and better availability of resources. The warehouse and logistics industries can re-engineer and re-design hi-tech mother warehouses, which can facilitate manufacturing industries. They would be equipped for value-addition services, fast-tracking, automated sorting & picking, and advanced retrieval systems.
Role of Daifuku
Daifuku provides solutions that can help industry warehouses to optimally store and retrieve raw materials as well as the finished goods. AS/RS helps in maintaining the inventory of stored goods, managing the cost of the required goods. One can track the system and have the data of each item stored or retrieved from the system. Some of the advantages also include consolidating the stocks in the warehouses and controlling demand variation. Moreover, as consolidations of the warehouses happen, the volume per warehouse will go up drastically which will be difficult for human to handle without committing errors.
Daifuku AS/RS system, a technology-based storing system, can prove beneficial in the long-termfor the industries. It helps in providing improved service level at better costs in overall supply chains. AS/RS also helps in the rapid movement of goods in storing and retrieving. As the system is automated, it reduces the requirements of the workforce and increases safety. Also, AS/RS system helps in increase of productivity and accuracy levels.
Since 1937, Daifuku has been world-class Automated Materials Handling Company – conveying, storage, sorting, picking and controls. We have a global network of offices and subsidiaries that offer design, engineering, sales, installation and commissioning of an Automated Storage and Materials Handling System.
For more information, visit www.daifuku.com/in
The author Mr. Asim Behera is presently COO at Factory Automation & Distribution Automation, Daifuku India. He joined Daifuku as a General Manager at FADA and procured multimillion-dollar projects within the first 2 years of operations. He is a business veteran, a guest speaker at various industry platforms such as CII, ASSOCHAM, CEMAT, IWS, and Symbiosis University and an expert in automated storage & retrieval systems and material handling systems. He carries an experience in varied markets such as India, US, Europe & Japan for helping companies set up market entry strategy for new technologies and services. You can follow him https://www.linkedin.com/in/asimbehera/
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