FMCG Players Gear up for Business Under GST

India: Companies like PepsiCo, Dabur, Kellogg’s and Hindustan Unilever among others are in the last leg of preparation for the rollout. The regime will be functional throughout the country with effect from April 1, 2017. This analysis and development of these services will help the companies facilitate the seamless interstate movement of the goods.

Currently, each state has its own tax regime and laws regarding doing business. To comply with that, the companies must setup warehouses in almost all the states. However, under GST, all the states will follow uniform taxation, thus giving the FMCG players an opportunity to consolidate their warehouses and services. GST will also help improve distribution efficiency with better IT infrastructure in all the verticals of consumer goods. Many companies have already completed the impact analysis of GST before and after its rollout, analyzed the impact of GST across the value chain, segregated performance enhancement opportunities and have started making changes in IT systems. The companies are also taking feedback from their vendors and customers for a smooth transition.

According to TechSci Research, this transition is important for the FMCG industry given the fact that this would facilitate in the reduction of the inventory levels and therefore, reducing the associated costs while allowing flexible demand fulfilment strategies. Moreover, the consolidation of warehouses will help them shift from distributed, state driven model to a unified central system for a region, which, in turn, will allow these companies to focus their investments on other areas for improvement like IT, logistics etc.