GST Impact on

Supply Chain Management

MRITYUNJAY ACHARJEE
Visiting Faculty IIM-C

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 Fiscal considerations key determinant for
structuring Supply Chain
Fiscal considerations are considered as key determinant
of supply chain structuring in India with manufacturing
bases and distribution network are engineered primarily
to harness Fiscal Benefits.

Availability of tax exemptions / benefits and the

prevalence of differential taxes based on geographical
locations have influenced the structuring of Supply
Chain, procurement Patterns and Distribution network.

Decisions are based on Tax Efficiency rather operating

efficiency
Dual GST would significantly impact supply chain
GST in India
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 Why to Choose

1. To understand the Tax Concerns before effecting any change in the Supply
Chain

2. Tax issues are extremely important to Cost effective Supply Chan Management

3. Crafted Supply Chain may cut across many tax and regulatory environments

4. Shape the Supply Chain to meet total business objectives.

5. Reduce Duty Cost and improve Cross Border Movements

6. Identify opportunities & incentive packages under different fiscal statues.

7. Assess the benefits and facilitate Planning, analysis and implementation of

shared services

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 Supply chain managers balance total logistics cost factors
against customer service factors

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 GST Key Challenges regarding
Supply Chain
Supply Chain is impacted by Several forces :

1. Intrinsic to the Organisation

2. Market Specific Forces
3. Fiscal in nature

GST in India
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 Few Question before we proceed
Whether Stock Transfer / Branch Transfer is chargeable to Sales
Tax / VAT ?

Whether Freight charges is levible with Sales Tax / VAT

Whether Operating Lease of Equipment / Containers are

chargeable with VAT as well as Service Tax ?

Is Inter State sale against form C is always Concessional

Whether developing any customer specific software based on

original off the rack basic programme (IBM make) would be
chargeable with VAT or Service Tax or Both

Whether VAT and Excise Duty both applicable simultaneously

Impact of Negative List concept / Reverse Charge

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 Driving Factors of Supply Chain
Sale of Consumables within a state How to minimise tax
liability.

How to procure Raw Materials, Packing Material, Consumables in

a most tax effective manner to reduce Landed Cost

How to maximise Post Tax Return

How to maximise Value Addition in Supply Chain

GST in India
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 AGENDA
Need for a comprehensive Tax Reform in India.

GST - Concept Analysis

GST Applicability in Inter State Transactions

GST Structure & Constitutional Amendments

GST Rates & Impact Analysis / GST on Services

Highlights of Discussion Paper of EC

Mapping & Realignment the Supply Chain

Opportunities, Challenges and Road map ahead

Case Study

GST in India
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 Tax Reforms Imperative for competitiveness & growth

Increased International Competition.

Larger Revenue required for physical & social infrastructure.

Accelerated Economic Growth is possible only in Conducive Tax

Environment.

Present complex multiple tax structure not

conducive for growth and competitiveness.

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 Tax Effective Supply Chain

It is the integration of tax planning into business and value chain

restructurings that may involve the relocation of assets, functions and risks
across jurisdictions.

Increased profit after tax and therefore shareholder return above the line
Improved supply chain management accessed through the creation of
centrally controlled strategic and tactical operations.

An ability to leverage procurement scale

Improved tax risk management

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 Objectives of Tax based SCM
Increased profit after tax and therefore shareholder return above the line
Improved supply chain management accessed through the creation of centrally
controlled strategic and tactical operations

An ability to leverage procurement scale

Improved tax risk management

Aligning Tax and Business considerations across the supply chain.

To enable the companies to evalute, design and implement changes to their

Supply Chain that integrates Tax with Business Objects.

To ensure Tax enhanced operational benefits and to reduce overall risk profile.

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 Why to Choose

Corporate Tax Rates 15% - Hong Kong, Singapore

20% - -25% Taiwan, Chaina, South Korea
30% - India, Malyasia, Indonesia, New Zealand

GDP rate - Singapore 16%, China 8%, India 5%

Applicability of the Double Tax Avoidance Agreement in structuring the

most Tax efficient Supply Chain Structure

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 Factors Influencing
Business Performance Issues
Global Sourcing
Contract Manufacturing
Shared Services
Process efficiencies
Cost Optimisation
Capacity Management
Distribution Network
Freight & logistics
Sales & distribution
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Tax Consideration
Asset Disposition
Transfer Pricing
Profit Repartition
Customs & Trade Zone
Location of Taxable events
Indirect Taxes
Permanent Establishment issues
Local Tax issue / Entry tax etc
Incentives (corporate / individual)
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 Integration of Taxes into GST

Central Taxes State Taxes

- Excise duty - State VAT

- Service tax - State Excise
- CVD - Luxury tax
- CST - Entertainment tax
- Various Cess - Entry tax
- Addl Customs Duty

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 TAXATION OF SERVICES

Both the Centre and the States will

have concurrent power to levy tax
on all services.
Basis for taxation on services is
destination based
The principles for taxation of inter-
state and intra-state supply of
services has been formulated.
An innovative model of Integrated
GST(IGST) will be adopted for
inter-State transactions of goods
and services.

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 TAXATION OF SERVICES

Greater Challenges to levy Tax on

Interstate Services

Methods & Mechanism

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 GST Challenges & Expectations

GST Challenges
&
Expectations

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 GST; Challenges & Issues
The ideal model for Indian scene
Constitutional changes
The optimum RNR
Shifting form originating to destination based / Consumption
based tax model
Revenue deficit of poor states / producing states with low
consumption-
Place of supply / Service Rules
Place of Supply Rules for telecom, broadcasting, IT, BPO,
Transport services etc.

GST in India
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 GST IMPACT ANALYSIS

SUPPLY
FISCAL IMPACT CHAIN

GST

CASH FLOW I T SYSTEM

ACCOUNTING

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 FISCAL IMPACT

PRODUCT PRICING
SEAMLESS FLOW OF CREDIT
BENEFIT OF EXCISE EMEMPT
ZONES
CUSTOMS DUTY TOO WOULD
NOT BE A COST EXCEPT BCD

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 CASH FLOW IMPACT

WITHDRAWL OF EXEMPTIONS
CONVERSION OF EXEMPTION
TO REFUND
GST ON STOCK TRANSFER &
IMPORTS
IMPACT ANALYSIS

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 SUPPLY CHAIN IMPACT
SOURCING FROM LOCAL /
INTERSTATE / SEZ
VENDOR PRICE NEGOTIATION
WAREHOUSE LOCATIONS
MANUFACTURING LOCATIONS
DISTRIBUTION CHAINS (DIRECT SALE
/ WAREHOUSE)
SPOKE & HUB - REDEFINE

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 ACCOUNTING & IT IMPACT
POSSIBLE DIFFERENCE BETWEEN GST LEVY DATE &
DATE OF REVENUE RECOGNITION (SUPPLY POINT)
SUPPLY vs. SALE
ITEMS OF BALANCE SHEET & P/L ACCOUNT
RECONCILIATION OF GST ON STOCK TRANSFER WITH
ACCOUNTING RECORDS
IT SYSTEM NEEDS MODIFICATIONS
REVISION IN MIS REPORTING

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 Supply Chain Planning Decisions

STRATEGIC

TACTICAL

OPERATIONAL

Procurement Manufacturing Distribution Logistics

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GST in India
 SUPPLY CHAIN MANAGEMENT IS FACILITATED BY :

PROCESSES

STRUCTURE

TECHNOLOGY

FISCAL CONSIDERATIONS

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 CHALLENGES AHEAD :

CREDIT DETERMINATION ON INVENTORY

NO CROSS BORDER TAX DISTANCE

SUBSUMING OCTROI & ENTRY TAX

CREDIT IN RESPECT OF SERVICE TAX ON

LOGISTICS SERVICES

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 CONCLUSION

GST is a Win Win solution for all

stakeholders.

It is a key enabler for increased

prosperity.

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 Thank
You

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