As per estimates, Indian warehousing industry is worth INR 900 billion and it is growing at a steady pace of 10 percent on an annual basis. So, whenever a new policy is implemented in the country, it might influence this industry as well. The latest policy that is about to be implemented is the new uniform and easily implementable tax policy known as Goods and Services Tax or GST. In crux, this new policy will be beneficial for this sector. Here’s how.
- Reduced Warehouses
Many companies feel that they need to have at least one big warehouse in different states because different taxes are levied at different states. This not only increases their storage costs but it also affects the structure of warehouses in India. With GST, the companies would be allowed to have a centralized warehouse that can serve multiple states like a good warehouse in Gurgaon can serve Haryana, Delhi, Uttar Pradesh, at once.
- More Inventory Control and Better Demand Forecasting
With the implementation of GST, inventory function would improve as there will be no need to set up huge inventory at once and dealing with issues like piling up huge stocks of inventory when the product is not in demand, running out of products when demand rises suddenly, etc. Post GST, fewer stocking points will be there and the cases of stock-outs will reduce because the companies will take advantage of economies of scale and make a better forecast for the future demand. It will further ensure that the supply chain process is smoother and there is less wastage.
- Technology Implementation Will Become Easier
When warehouses in India are set up centrally, they will be able to put more inventories at a central location and to manage that, they will need a state-of-the-art technology tool that ensures perfect planning of goods and makes processes more organized. Buying a state-of-the-art technological tool for each one of the warehouses in India might seem costly to companies but buying just one tool may seem worth the investment. Technology would, experts assume make processes more efficient and ensure better service for the end customers.
- The Sector will Become Organized
As a huge number of warehouses in India would reduce thanks to the increase in centralization, the process of organizing this sector would begin. The complexities that crop up with every company having 20-30 warehouses and 20-30 C&F agents would be eliminated. The overall efficiency of the sector will rise ultimately as inefficiencies arising due to complexity in the supply chain would reduce.
- Cost Savings
Companies that have several warehouses in India would soon realize that they need only a single centralized space to keep their products and this centralization would negate the need of paying taxes in different states, especially the states where the revues are not as high as the taxes. Hence, the companies would be able to save taxes. The hiring of manpower would also reduce with a centralized space for storage and the cost of human resource management will go down as well. Most companies would not hesitate to pass on the benefits to the clients and hence will opt for reducing the costs of the products or they will offer genuine discounts.
It is a fact that GST is the future of India and the impact of GST on Indian Warehousing sector would be good enough and this has been proved in the aforementioned points. For people or companies who fear change, they should realize that this change is vital and worth the small inconveniences that they might face while transitioning to this amazing tax policy. In case you don’t want to bother with opening a centralized warehouse in Gurgaon or another prominent location because you can’t spare the time, effort or costs associated with it, you can always take help from an outsourcing partner who manages your logistics needs and makes the supply chain better.