by Madhav Mohan

CIOs in the logistics sector to spruce up IT for GST

Nov 06, 2016
BudgetingBusinessComputer Components

CIOs from the logistics industry are getting ready to upgrade their ERP systems to accommodate GST.

Finally, the government has rolled up its sleeve and finalized a four tier Goods and Services Tax (GST) structure.

The four tax slabs as of now are: 0 percent, 5 percent, 12 percent, 18 percent and 28 percent. The services that are taxed currently at the rate of 15 percent are likely to be put in the 18 percent slab. CIOs in the logistics sector are getting ready to spruce up their IT systems to accommodate the new tax structure.

According to Crisil, implementation of GST in the logistics industry will diminish logistics costs upto 30% over a period of 3 to 4 years due to savings in logistics and removal of check posts.

M.K. Mittal, Head – IT, Aegis logistics, feels that once the GST is implemented, the first six months will be difficult for the business as well as IT professionals. It will take time for the users to understand the rules and regulations, as they may have to file returns to the authorities on a monthly or a quarterly basis. “However, the benefit is that one has to pay one tax and there will not be any ambiguity if a product would attract octroi,” he says.

From an IT perspective, “We are waiting for the patches to be released from SAP before April 1. As soon as we get that, we’ll start testing it on our development and quality server,” says Mittal.

Harvinder Singh Banga, Vice President – IT, International Cargo Terminals and Rail Infrastructure, says that his company has engaged with multiple partners including a consulting firm to take charge to identify the gaps and revise their IT infrastructure. “Some configuration needs to be done in our warehouse. For instance, we have SAP as ERP in the warehouse and patch upgrades need to be done.”

Banga also highlights business benefits. According to him, now there is more simplicity and clarity on taxes. Across India, there are different tax systems like inward and outward taxes and certain states charge in-transit charges and require in-transit passes. But going ahead, with a single tax structure, complexities will reduce, and supply chain will become more efficient.

According to Crisil, implementation of GST in the logistics industry will reduce logistics costs upto 30% over a period of 3 to 4 years due to savings in logistics and removal of check posts.

Anjan Deb, Head – IT, The Great Eastern Shipping, says, “Today we are paying 15 percent and even if it falls in 18 percent tax bracket, there isn’t much of a difference. A small margin of 2-4 percent will not make any difference, but if it was 10 – 20 percent, then it would have been a cause of concern.”

From the IT standpoint, “We have a customized ERP, and all our patch upgrades have already begun. As the tax rates are out, we have to change our accounting system, sales invoice, and procurement, as all are integrated,” he says. And from the business perspective, he believes that managing backend process will be easier and there will be less paper work.

On a similar note, Saunak Ghoshal, Partner – Technology Consulting, PwC India, points out, “The biggest impact will be making the necessary changes in the IT system. An internal or an external team has to carry out an assessment of their technology backbone. It could be ERP or other applications where taxes are calculated. ERP has come up with standard patches like SAP, where we put the slab value and everything gets calculated. It’s just that all the rules need to be applied.”    

We tried to understand the CFO concerns post GST implementation.  Ramkrishnan Kumaran, CIO, Flyjac Logistics, says “The CFO will think about the components where service tax will be applicable. He will also look into the cash cycle to see if filing will be done on monthly or multiple times based on the different slabs they have released.”

To conclude, the announcements of tax slabs by the GST council is a much needed step to improve supply chain efficiencies and reduce losses in the logistics sector. Many CIOs feel that it will take approximately six months for the companies to settle down with GST.