Impact of GST in Business Processes across Industries

GST will affect all industries Business Processes, irrespective of the sector. It will impact the entire value chain of operations , namely:-

1. Procurement

Purchasing across states is set to become a lot more hassle free as a unified tax structure will allow for seamless movement across state borders. Currently interstate logistics is a major pain area with a long queue of trucks waiting for clearance by state tax and octroi authorities is a common sight on Indian highways. This will soon be relegated to the past as free movement of goods will be possible within India. It is estimated that this will reduce distribution costs by as much as 10-15% and reduce the time taken for transport at the same time. Along with lesser inventory to be maintained due to shorter transport times, this will also open up a wider base of suppliers that will push costs further down.

2. Manufacturing

 Manufacturing is a very complex industry while reducing the cost of production & improving the incremental value for customers is one of the major challenge for every business. The new GST regime will trigger a transformation shift from a complex multi- layered indirect taxation system to a unified indirect taxation system. Under the new regime reduction in tax cascading may lead to lower cost. Therefore it will compel organizations to re- align bottlenecks in production process to make business opportunities better.

3. Distribution

Under GST the distribution model needs to be revamped due to free flow of tax movement in case of inter state supply of goods . Now businesses will not think of opening warehouses just because of cutting CST cost, instead they will think in more competitive manner & follow benchmark process like Hubs & Spoke Model where warehouse will be opened as a central depot & based on the customer demand delivery of goods shall be made. Avoiding unnecessary blocking of funds.

4. Warehousing

GST presents an opportunity for industry players to consolidate their warehouses and set up larger facilities, which will bring in supply chain efficiency. Therefore Model like Hubs & Spokes Model will be of real sense for logistic companies.

5. Sales

Since GST has made availement of credit arising from inputs a detailed task by following defined steps mentioned in GST. Therefore it automatically leads that tax collected  from sales made to customers should be deposited timely in order to allow them with credit benefits, else loosing on credit benefit is just like standing on edge & loosing the customer in GST regime.      

6. Purchase

 So far businesses with vendors was done even without contracts & agreements as credit benefit was not dependent on payment of tax by the vendor or not. But because in GST one can book the credit benefit only once there supplier has deposited tax. Now to make sure that vendors abide by these rules & let business function smoothly, there should be fixed terms & condition at the beginning which shall be done through agreements.   

We will try to sensitise about GST impact in each of these chains & many other chains.

Stay tuned 🙂

Conclusion

Organizations with heterogeneous transactional system may face the greatest challenge as they will have to make changes in terms of technology across all the systems & ensure everything works together seamlessly post GST implementation.