The Goods and Services Tax (GST) will transform the entire business landscape of FMCG (fast moving consumer goods), retail and logistics into a modern and efficient model, a survey said here on Tuesday.
An Assocham-MRSS India joint study on the FMCG sector’s logistics said big corporations are remodelling their operations into bigger logistics and warehousing under the uniform tax regime.
“All big corporations with positive impact for their supply chain are remodelling their operations into bigger logistics and warehousing,” said the joint study.
“This is being enabled by the fact that unlike in the past when a company was required to have warehouses in each state or else the goods movement would be subject to Central Sales Tax (CST), the IGST (Integrated Goods and Services Tax) has come as an enabler for setting up larger warehousing units without fear of tax burden,” it added.
According to the study titled ‘FMCG sector growth & logistic innovation’, new age warehousing and logistics would be assisted by the GST.
“Small and often ill-equipped storage space in the country would give way to neatly stacked, air-conditioned warehouses, with higher levels of automation. And driving the change in India’s supply chain are consumer goods companies,” it noted.
The study said big FMCG firms are in the process of consolidating their supply chain operations into bigger warehouses.
“The new facilities will now cover about 450,000-500,000 square feet of space, almost five times the biggest warehouses right now,” it said.
The study added that at the same time, logistics majors such as DHL, Allcargo and Mahindra Logistics were leasing bigger logistics spaces while real estate developers were investing billions in building bigger storage facilities.
“A well-designed, agile, responsive and an efficient supply chain is a clear competitive advantage for business today as such expectations held of India’s supply chain ecosystems are no different,” said D.S. Rawat, Secretary General, Assocham.
Till now, the entire warehousing for FMCG was based on a tax law that attracted imposition on movement of goods between one state and the other, the study pointed out.
“One or two small warehouses by large companies in each state may be phased out if they do not fit into their business models after implementation of GST. Besides, large FMCG players are training their vendors and distributors on how to go about GST roll-out,” it added.