The Impact of GST in the manufacturing sector in INDIA

Impact on manufacturing sector:

Reduced Cost of Production.

This sector is one of the crucial and competitive industry and reducing the cost of production while creating value for customers remains a challenge for every business. The new GST regime will be a great salutary influence, as a reduction in tax cascading will lead to a lower cost of production.

For an instance, suppose a manufacturer of shirts buys a raw material or inputs like cloth, thread, buttons, tailoring equipment worth Rs.100, a sum that includes a tax of Rs.10 with these manufacturing inputs of a shirt. In this process, the manufacturer adds a value to the materials he started out. Let us take this value added by him to be Rs.30. Now, the gross value of his good would be RS (100+30=Rs.130. At a tax rate of 10%, the tax on an output of the shirt will be then Rs.13. However, under the GST, he can set off the tax against the tax he has already paid on raw material (Rs.10). Therefore, the effective GST incidence on the manufacturer will be only Rs (13-10= Rs.3).

 

Hassle free Supply of Goods.

The checkpoints at the state border, which are tangled with material scrutiny and location, based compliance lead to unproductive production, logistic time and transit hours aligning with regulatory obstruction reduce the efficiency of Indian manufacturers compared to their international counterparts. The new GST model will unify the Indian market and assist the smooth flow of goods within the country.

Reengineering on Supply Chain Management.

Availability of input tax credit on state supply of goods and services may lead to warehouse re-engineering that can remove an extra level of warehousing in the supply chain, hence leading to greater cost benefit.