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 All the comprehensive indirect tax levied on manufacturing, sales, and consumption of goods as well as services has been replaced by a single Value-Added Tax, Goods and Service Tax (GST)proposed at the national level, exempting the cascading effect of taxes over the production and supply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, as 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, that 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 caused low growth rate. To escape the comprehensive taxation policy, the industries have been motivated for setting up the 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 better than paying these taxes. It had not only led to a huge investment in the storage houses or go-downs, which were small and unorganized warehouse management. 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 the production. Now, any extra charges on products shall be questionable. Hence, there is a severe cost cut for these manufacturing industries, the profit share of these company has been cut by a considerable amount. The concerns of the manufacturing industries have been shifted to the availability of resources, labor, and fast transportation, and are no more preoccupied with the VATs (once applicable on the goods and services).

Impact of GST on Warehousing & Logistics
Among all the industries, the warehousing industry has been enrolled as the beneficiaries of the new tax regime. The warehousing industries play 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’ projects.
Warehousing and logistics have been an integral part of any business strategy planning. Following are the ways GST will help aid to Warehousing & Logistics as well as manufacturing industries.

• 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 has significantly increased the consumption of these goods as the production cost and profit share have been cut down. The cost of these products shall now be reasonable to the customers, as there are no hidden taxes or loopholes, all the expenditure in the production/manufacturing, transportation, storage, and sales are now perceptible.

• Efficient Bulk Handling
The manufacturers can now indulge in the heavy productions inputs and outputs. 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 enough 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 a human to handle without committing errors.

Daifuku AS/RS system, a technology-based storing system, can prove beneficial in the long-term for 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.

The significant benefit of GST is that there are no multiple taxes and are brought under GST, relieving the burden on the industries. In the big picture, GST definitely has a positive impact on warehousing industry as well as manufacturing industries.

About Daifuku

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.

Contact US
Daifuku India Private Limited
Unit No. 411, Wing A, Boomerang,
Chandivali Farm Road, Powai,
Andheri East, Mumbai 400072,
Maharashtra INDIA
Phone No: 022 42735555
Email: [email protected]
Website: http://www.daifuku.com/in/