By TNI Newtwork
Date: Jun 30 , 2017

New Delhi: Supply chain management is back bone of manufacturing sector and logistics pay a crucial role in that. But Indian logistics segment is highly fragmented. While moving finished goods from manufacturing center to warehouses, and from warehouses smaller distributors, and then eventually to the end retailers, warehouses are very important infrastructure in the supply chain.

Today setting up of warehouses are dependent on two parameters one is demand in the area and other is to fulfill the taxation aspects. Pre GST scenario warehouses were setup to optimize the CST central sales tax.

But post GST as this transfer tax gets subsumed in the overall GST, the economic logic will come into play. The location of the warehouse will be decided purely by economic considerations and the number of warehouses will come down.

The consolidation of warehouses may not happen immediately, but in the long run number of warehouses will come down, this will have an impact on the size of warehouses, we will have bigger warehouses in more centralized location.

 That means single warehouses will handle larger quantity of goods with the help of better warehouse management technology, higher tonnage and longer distance trucks. The logistics economy scale will go up and allow manufacturer to optimize the operating efficiency.

 Today we have multiple warehouses system because of CST; therefore there is a distribution of load, so manufacturers are using smaller trucks and sometimes even it is not full. In post GST era, since the no. of warehouses will get reduced therefore tonnage will go up significantly. Higher tonnage and longer distance will carry the maximum quantity of goods and will bring best operating efficiency.

 In coming day we may see a fresh investment in logistic segment like warehousing technology, cold chain etc.

 GST will also change the way Goods Transport Agency and Express Cargo Operator are being taxed today. Now both the category effectively will have the same tax unlike earlier (GTA: 4.5% and ECO: 15%)