GST is much more than just a tax reform. It’s a whole new way of conducting business.
It’s been over a month now of the GST implementation and it has enveloped more than 6 million businesses across industries and counting fast. The Indian Retail Sector, which is the fastest growing industry in the world is expected to be hugely benefitted by this potential game changer. GST is supposed to play a pivotal role in stretching the retail scenario to 1.3 trillion USD by 2020, registering a CAGR [Compound Annual Growth Rate] of 16.7% spread over a span of five years from 2015 – 2020.
Retail is penetrating super-fast in the tier-2 and 3 cities of India [5th largest retail destination in the world] and the industry is well backed up by the FDI policies, which allow 100% FDI on single brand and 51% in the multi-brand retail.
GST is expected to only propel the growth of the Indian Retail and there are many evident benefits, which the industry experts foresee.
ü Reduced taxes
ü Enhanced supply chain efficiency
ü Seamless Input Tax Credit
ü Stretching of retail markets
ü Tax on promotional items and gifts
On an average, the retail industry in the pre GST period [prior to 1st July, 2017] was taxed with a bunch of indirect taxes like VAT, CST, service tax on warehousing, octroi, entry tax. etc. The unified GST taxation system is bound to squeeze the overall taxation burden on the retailer and the taxation percentage will be substantially lower than the previous regime.
Enhanced supply chain efficiency:
The pre GST period had loads of complexities and challenges in the retail supply chain relating to long queues and complex documentation at the check posts which added to the transaction time and costs. All of this has been considerably reduced since the one nation-one tax, has been enforced and the industry has slowly started witnessing lower costs, reduced waiting time and minimal logistics in the overall supply chain, only adding to their bottom line profitability. There would also be a considerable consolidation in the number of warehouses and it is only logical that retailers will prefer to have lesser warehouses serving extendedboundaries resulting to a hefty drop in the warehouse costs.
Seamless Input Tax Credit:
GST will reduce the burden of tax on the retail sector as it will set off the tax, starting from the manufacturer – wholesaler – retailer to the customer point. It will benefit the retailers by eliminating the cascading effect of taxes, thereby reducing the overall tax burden.
Stretching of retail markets:
GST undoubtedly will open doors for the new markets as it will subsume all the indirect, state and central taxes and a new scenario of a unified tax across the nation with much clarity and transparency will emerge.The business expansion will become relatively easy across the states and anyone could now sell anywhere with a single GST registration.
Tax on sample items and gifts:
The GST model levies taxes on every supply without consideration and every gift or sample item is now taxed in the new regime, contrary to the earlier ecosystem. Earlier, the gifts and the sample items used in the marketing efforts of the retailers were tax free, however, now the retail industry will feel the pinch of it and there would be a significant upsurge in the marketing budgets.
The sector would see new laws pertaining to invoices creation, which are as follows:
ü Invoice creation is mandatory for sale value above Rs. 200. However, an invoice must be essentially provided, if the customer insists for anything less than Rs. 200 too.
ü Invoice above Rs. 50,000 should mandatorily have the customer address.
ü Individual invoice details are not required for return filing. A consolidated filing will suffice.
ü Sale through e-commerce operator has to be reported per operator.
Benefits of GST on the Indian Retail Sector would have ripple effects on the economy and it would overall strengthen and fuel the growth of the retail sector exponentially.
By Mr.Nishank Goyal, CEO, Masters India – a GST suvidha provider