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GST may bring down supply chain costs
November, 04th 2011

Industrial and trading houses were advised by experts to start aligning their operations, especially in the area of supply chain management, in tune with the new Goods and Service Tax (GST) regime that is likely to be in place by October 2012 or April 2013.

The tax experts, addressing representatives of business houses at a seminar organised by the CII here, felt that companies should set up their internal GST steering committees to study the impact of the new tax regime on their operations.

Supply chain management
One of the areas that GST will make a profound impact was identified as supply chain management.

The new tax regime will change the entire existing supply chain structure, right from procurement (of raw materials) to manufacturing and distribution.

It may possible that it would compress the supply chain system, as companies could cut down on warehousing costs and stocking points, Mr Nitin Goyal, Senior Manager, Tax Advisory Services, BDO Consulting, said.

Companies, under the new tax structure, will have more flexibility to decide on inter or intra-State procurement, direct sales or stock transfer, which will eventually bring down logistics costs.

But you have to start planning today.

For example, you may need eight warehouses instead of the present 12, which means you have to close down four for gaining better economic mileage, Mr Goyal said.

New tax regime
Mr Suresh Chanda, AP Commissioner of Commercial Taxes, was hopeful of the new tax regime being in place by October or November next year.

He was confident that GST will bring down cost of production and the benefit would be passed on to consumers.

He, however, was of the opinion that States should be given some freedom in the form of a tax band to choose from, instead of a fixed rate. In Europe, different countries could chose from a band of 15 to 25 per cent, while (most) States in India are looking for a band of two to three per cent, he pointed out.

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