Implementation of the GST system will provide the manufacturing sector a significant boost and drive the growth and development of India's economy.
India's logistics and supply chains functions will undergo significant transformation. Sourcing, warehousing and distributions decisions will be no longer affected by the taxation system but will be mainly based on operational efficiencies, scale, and closeness to major consumption centers.
Manufacturing and warehousing locations, as well as supplier networks are set to witness an overhaul. Moreover, since there will be practically no state borders companies will now have substantial opportunities to expand their geographical coverage.
The warehousing industry is estimated to be valued around INR 560 billion and is already growing at a 10% yearly. The new tax reform will have significant effect on it and is expected that it will boost profitability in logistics by 3-4%.
The GST represents the biggest tax reform in the country, which along with other government initiatives such as Make in India, will help to develop India as a manufacturing hub for the global market. Moreover, the Indian ecosystem will be more favorable to local and foreign businesses, and could help India to reach high levels of "ease of doing business globally".
The manufacturing industry in India has been stagnant for more than two decades contributing just for the 16% of the GDP, due to a complex tax structure, inadequate bureaucracy and infrastructure. However, the taxation system has taken a drastic turn. From 1st July 2017, India adopted the Goods and Service Tax (GST) system. State boundaries are now diminished and the way business is done is improving in India.
The past taxation system was a complicated multi-layered system, where both central and state government imposed taxes, hence resulting in an increase of the cost of goods sold and various inefficiencies. Manufacturers had to have warehouses in multiple location to avoid local taxes, and ultimately had to face higher transportation costs.
The GST system has successfully solved the previous cascading system, transforming it into an unified value-added system. Not only manufacturers but also end customers will benefit from it, as the reform will infuse competition in the market and manufacturers will be able to decrease selling prices without affecting margins.
India, or also known as The Republic of India, is the second most populous country, the seventh largest by area, and the most populous democracy. After 1991, the year of the Economic Liberalisation, India has emerged as one of the fastest-growing economy in the world and as a newly industrialized economy. India's GDP ranks sixth in the world and third in Purchasing power parity. Backed by its strong democracy and partnership, the country is expected to be one of the top three economic powers of the world over the next 10-15 years.Download White Paper