Supply chain scenario likely to alter with GST: PwC Report

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Mumbai | September 15, 2015 9:38 PM

The supply chain scenario is expected to change sharply at the onset of GST, or will at least be revalued, as it is expected to change the way retailers do business in the country...

Goods and Services tax‘It is anticipated that GST will replace current complex central and state indirect taxes to create a seamless indirect tax at three levels – central, state and integrated GST.’ (Reuters)

The supply chain scenario is expected to change sharply at the onset of GST, or will at least be revalued, as it is expected to change the way retailers do business in the country, according to a PwC report.

“The big disruption that is going to impact the way retailers manage supply chains in India is the introduction of GST,” said Anurag Mathur, retail and consumer goods practice leader, PwC.

Broadly, it is anticipated that GST will replace current complex central and state indirect taxes to create a seamless indirect tax at three levels – central, state and integrated GST – the report said.

Supply chains that have been designed to minimise the incidence of tax will have to be re-engineered on first principles of demand and supply clusters instead of tax exemptions, it added.

It envisages India to be a single cohesive market where retailers will be able to avail credits of their sales and purchases all across the country.

“GST is going to alter the way retailers have traditionally viewed supply chains in India, a set of 29 different markets,” the report said.

A unified view of the supply chain for the country as a whole is going to change flow paths, transport lanes, and distribution routes to the consumer, the report added.

“This is a big opportunity for redeveloping the supply chain network and identifying the cheapest and fastest ways of fulfilling consumer demand. This transition is going to be an inflection point for many retailers and will be the deciding factor of who ultimately wins the game,” it said.

In comparison to the rest of the world, the Indian retail supply chain is under-developed and is one of the major obstacles in achieving profitable growth, the PwC report noted.

While many retailers admitted that “developing an omni-channel strategy was high on the agenda”, such unique set of logistics needs is not well-established and available in the country at the moment, driving many e-commerce players to establish their own delivery network, it said.

The report also pointed out that e-commerce companies currently have a low loyalty percentage compared to global counterparts and in order to be ‘profitability-ready’, they have to constantly strive to understand consumers.

In the next two to three years, services are expected to contribute up to 25 per cent of e-commerce business, it said.

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