The goods and services tax has brought about some major changes in the economy. Also, this single unified tax has eliminated numerous taxes which were charged earlier. This integration of taxes into a single tax has made taxation simpler and easy to understand.
GST is a single tax but has different categories which depend on the location of the manufacturer and the end-user of the products or services. The types of gst include:
- State Goods and Services Tax or SGST
- Central Goods and Services Tax or CGST
- Integrated Goods or Services tax or IGST
An SGST and CGST will be applicable if the goods and services are distributed within the boundaries or a particular state or Union Territory. IGST would be applicable if an inter-state supply for goods and services take place. Their computation depends upon the slab the particular commodity or service falls into.
Impact of GST on the Retail Industry
Various factors that form the basis of the GST implementation have brought about a change in the retail sector. The retail sector, like other sectors, has been equally impacted by this change in the taxation system.
- Retailers are not involved in the manufacturing process.
- Retailers are not the end-users of the products and services.
With the online GST registration and issuance of an online gst certificate, all processes have been streamlined. The invoices have to be uploaded online. The buyer then accepts the invoices.
This process makes sure that no one can escape from their tax obligations. Returns have to be filed. The whole retail segment, which was rather unorganised earlier, has come under a systematic check.
The entire value chain is being tracked online. Also, a push has been given to the manufacturing sector via GST. This would lead to an increase in production which would result in re-stocking of the products by the retailers.
The outcome of the GST Implementation on the retail sector
The retail sector constitutes almost 10% of India’s GDP. Various changes have been witnessed in the retail sector due to the changes in the taxation system. Let’s understand the outcomes which have come from this implementation.
- Decrease in taxes
Earlier the retailers had to pay a 30% of tax owing to multiple taxes like VAT, Service taxes etc. This has been reduced to 18%. Also, apparel below Rs.1000 and footwear below Rs.500 will attract only a 5% GST
The cascading of taxes was a major issue in the retail sector. With the application of GST, the burden of retailers would reduce to a great extent.
- Tax Saving through seamless Input Tax Credit
With GST, everything has become invoice based. Also, the ‘tax on tax’ mechanism keeps on making the goods and services expensive at every point on the supply chain. This has been done away with due to the implementation of a singular tax.
The manufacturers pay taxes on raw materials. They also pay taxes to the government when they make a sale. With the input tax credit, the tax paid on the inputs can be claimed, which reduces the tax burden on the retail sector.
- Improvement of Supply Chain and ease in movement of goods throughout the country
With one tax coming into the picture, various unnecessary documentation which came from different taxes can be avoided. The country would have no borders in terms of taxations. The retail sector would no longer be paying different taxes at different stages of the products in transit.
This would enable the free flow of goods from one state to another. Retailers could stock up easily. Also, various complexities of the supply chain are removed.
- Application of tax on promotional items, gifts, etc.
GST is charged based on the supply of goods and services. The sale value of the goods and services have no part to play in it. Supplies without any consideration would be subject to GST.
Retail sectors spend a lot to promote their goods and services. Earlier, these promotional items were tax-free. With the implementation of GST, all of these items would be considered for taxation.
- Tax involved in every decision
All aspects of the retail sector would be affected by the implementation of GST. From supply chain to invoicing, GST policies will have to be taken care of. Changes in the accounting systems will have to be made.
Also, pricing policies should be GST compliant. Invoices will have to be saved carefully or stored electronically to be able to avail the input tax credits.
Conclusion
The impact of GST implementation has been mostly positive on the retail sector. The supply chain efficiencies will increase and prove to be beneficial for the retail sector. Also, the prices for consumers will fall substantially.
