For years India has planned to reform the way it administers taxation for domestic movement of goods across its state borders with a simplified, general sales tax (GST). And for just as long it has been delaying the implementation. So it came as little surprise that the latest deadline, April 2011, is now likely to be put back again. Plans for the GST bill to be tabled before the closing of parliament in September were once again delayed as state governments requested more time to study it.
Under the current tax system charges are made on the interstate sale of goods, encouraging companies to hold separate inventories in each state despite the inefficiencies, extra management and warehousing costs added to the supply chain. It often means that, after central and state taxes, goods that cross state borders are subject to up to 30% tax by the time the product reaches the consumer.
“As everyone knows, India is a maze of taxes that vary in form and complexity from state to state,” said Renault India spokesperson Ashish Sinharoy. “A GST regime would be of immense benefit to the manufacturing sector, since it would ease the documentation process and, due to lower levels of multiple taxation, eventually benefit the consumer.”
Renault inaugurated production at its new Alliance plant with Nissan in Chennai in May, from where it transports cars to every state in the country, with customers in those states having to pay varying prices for the same car depending on the state in which they are bought.
Others see the GST as a step towards a more efficient, hub-and-spoke delivery network with use of regional distribution centres. “The new regime will promote giant warehouses in India,” confirmed Adani Logistics VP of business development, Umesh Bhanot. “The concept of regional distribution centres for automobiles will take root as a consequence.”
Renault, meanwhile, affirmed its confidence in the Indian authorities to eventually put the GST in place and said it was not worried about delays. Indeed, the GST probably will be worth the wait, but much money and time will be lost in the meantime.