GST! The biggest game changer for Indian taxation system. Now a days it’s one of the hot subjects continues to baffle everyone. The present tax structure is very complex, includes too many taxes, too many outdated rules, too many legislations that can take up too much time and effort.
Hence the government is going to roll out Goods & service Tax, after a long wait, the Constitution Amendment Bill (GST Bill) was finally cleared in both the Houses of Parliament to tackle existing complexities of indirect taxes to bring price uniformity and make India one unified common market. In this article we are going to take a look how GST will impact the supply chain in India?
Supply chain ecosystem in India
Supply chain is the oversight of material, information and finance that move through the process, from supplier to manufacturer to whole seller to retailer to customer. The ultimate objective of supply chain is to achieve JIT (Just-in-time), inventory optimization and reduce cost. In present system there are an array of taxes such like excise duty, VAT, CST, etc. which levied at each level and added to the whole value known as Tax Cascading. GST will make it simpler and easier by contributing to a lower cost of production as tax at each level will be charged only on the value addition to an item. The another major defect of current indirect tax regime is the absence of tax credit will be eliminate by allowing unrestrictive tax credit under GST.
Right now industries keep warehouses and C&F agents at every state to avoid tax credit unavailability but new GST regime will provide industries the freedom to reconstruct their supply chain network. The new GST regime will once again better the situation by unifying the Indian market and facilitating a smoother flow of goods within the country. Although border checkpoints may still exist for some time, the lesser scrutiny at these checkpoints will greatly reduce transport hassles.
Goods and Service Tax is an attempt by our government to simplify and streamline our taxes, facilitate market growth and increase the revenue for our government by increasing its tax base.