Consumer Goods Tax Management and Implications with a Global Market Presence

Taxes are the biggest source of income in many countries. From infrastructural development to running governments, taxes play a vital role in establishing the country’s development. In the USA alone, the customs duty levied amounted to 80 billion USD in 2021 and will grow to 110 Billion USD by 2032.

Tax compliance is significant in supply chain management for consumer goods because it directly relates to the cost and efficiency of operations. Non-compliance with global taxes or regulations can result in numerous lawsuits, reputational damages, and penalties. It is why CPG companies must stay updated with tax regulations in the countries of presence.

Being Tax compliant helps companies:

Cost Stabilization

Taxes and duties levied will affect the pricing of the company. The combination of different taxes will affect the import and export costs of the CPG products. Non-compliance and unexpected penalties can further affect the operational cost of the products across the supply chain.

Legal Compliance

CPG companies are legally bound to comply with the tax regulations of the country where they have set up their base. Failure to comply with tax regulations will attract company lawsuits. It will affect the cost and timings within the supply chain industry.

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Brand Management

The failure to comply with taxes affects companies adversely as the companies are deemed unreliable and unethical, especially since taxes are associated with the government, which puts non-compliance under scrutiny.

Supply Continuity

Goods or products can get seized by authorities at ports and airports due to non-compliance with taxes. All of this is bound to negatively affect the efficiency of operations at the supply chain level.

Now that we understand why tax compliance is essential, we must understand the different types of taxes used globally.

Value Added Tax (VAT) 

VAT applies to products and services at each level of the supply chain. Knowing country-specific VAT regulations will help companies to achieve compliance with minimal effort.

Custom Duty Taxes

Custom Duty Taxes apply on goods that cross international borders. As a CPG company, your business needs to understand the unique tax requirements across the countries sold.

Excise Duty

Excise taxes are charged on goods like tobacco, sugar drinks, and alcohol. The central government levies taxes to ensure these CPG products’ production, sales, and licensing.

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GST (India)

All CPG companies supplying products in India have to pay GST. The tax system requires manufacturers and suppliers to pay the same taxes for a particular product nationwide. GST ensures that the government has mitigated double taxation and its cascading effects.

Within Ivy’s Unified Commercial Platform, CPG companies can configure unique and custom tax plans based on their business requirements. Usually, product price is a combination of taxes and the product’s cost price. Companies must separate product costs from taxes while submitting their accounts.

Automated Taxation Module by Ivy Mobility

We have an automated Tax module that helps simplify the accounts reconciliation process with the ability to generate reports that make all the difference to year-ending calculations. These reports come in handy when you have to file for Tax returns at the end of the fiscal year. Here are the highlights of the module:

  • You can monitor, review and adhere to all accounting and taxation needs of your business across multiple markets on one Unified Commercial Platform.
  • CPG companies can customize the tax management module per their product-specific tax liabilities and other business scenarios.
  • Managing tax implications of credit limits, payments, budgets, incentives, and returns in field operations, is seamless and hassle-free.
  • Set up automation, alerts, and notifications on workflows for tax monitoring and liabilities.

Even if tax considerations don’t directly drive business decisions, they can still affect a company. Consumer goods companies may need to assess how changes in their operations and structures can ensure they meet tax compliance requirements and make tax-efficient decisions. Supply chain changes can be significant and happen gradually, so monitoring and evaluating them is critical.

Conclusion

An automated accounting system is essential for enterprise CPG companies that manufacture and deliver thousands of products. Automation comes in handy when companies need to audit and meet tax compliances to avoid any negative repercussions of non-timely payment of taxes. Not only does it simplify tax filings, but it also helps pay the right amount of money to the government automatically.

If the features mentioned above are what your organization is looking for, then you must book a Demo with us to understand what we offer.

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