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Introduction to Goods & Service Tax (GST)

The ‘Goods and Services Tax’ has been rolled out from the 1st July
2017 in India, making the dream of ‘One Tax, One Nation’ a reality. As
expected, a lot of hue and cries are being seen all across the country,
mostly related to the MRP and supply of goods and commodities. The
government is making all it’s effort to enlighten people about GST and is
actively addressing all the doubts and rumors circulating in the air.

Goods and Services Tax (GST) is an indirect tax (or consumption

tax) imposed in India on the supply of goods and services. GST is imposed
at every step in the production process, but is meant to be refunded to all
parties in the various stages of production other than the final consumer.
Goods and services are divided into five tax slabs for collection of tax - 0%,
5%, 12%, 18% and 28%. 32% However, Petroleum products, alcoholic
drinks, electricity, are not taxed under GST and instead are taxed
separately by the individual state governments, as per the previous tax
regime. Citation There is a special rate of 0.25% on rough precious and
semi-precious stones and 3% on gold.

In addition a cess of 22% or other rates on top of 28% GST applies

on few items like aerated drinks, luxury cars and tobacco products.
Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-
GST, most goods are expected to be in the 18% tax range.The tax came
into effect from July 1, 2017 through the implementation of One Hundred
and First Amendment of the Constitution of India by the Indian government.
The tax replaced existing multiple flowing taxes levied by
the central and state governments.

The tax rates, rules and regulations are governed by the GST
Council which consists of the finance ministers of centre and all the states.
GST is meant to replace a slew of indirect taxes with a federated tax and is
therefore expected to reshape the country's 2.4 trillion dollar economy, but
not without criticism. Trucks' travel time in interstate movement dropped by
20%, because of no interstate check posts.

GST is one of the biggest tax reforms since independence. GST will subsume
almost all the indirect taxes levied by state and central government and will make a
significant impact across industries.
The impact of GST on retail sector is going to be positive as it will bring down total
indirect taxes, increase supply chain efficiency and facilitate seamless input tax credit.
After implementation of GST, state boundaries will be irrelevant from taxation and

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documentation point of view. Vanishing state boundaries will reduce the complexity for
retailers and increase the distribution reach as well as efficiency.

GST is charged at the national and state level at similar rates for the
same products and it also replaces almost all the current indirect taxes that
are imposed separately by the Centre and the States. Goods & Services
Tax is a destination based tax which means that the tax is paid at the place
of supply.

Some of the State taxes that will be subsumed under GST are –

Some of the Central taxes that would be subsumed under GST are –

 Central excise duty

 Duties of excise
 Additional duties of excise
I. Goods of special importance
II. Textile & textiles product

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  Additional duties of custom or CVV
 Special additional duties of customs
Benefits of GST
1. Eliminating the cascading effects of taxes
2. Tax rates would be comparatively lower
3. Reduce tax evasion and increase the revenue and GDP by
widening the tax base
4. There would be seamless flow of the input tax credit
5. Price of the goods and the services would fall
6. There would efficient supply chain management
7. It would promote the shift from unorganized sector to organized
sector.
8. It would eliminate 17 indirect taxes and therefore the compliance
cost would fall

Eligibility
Its eligibility would primarily be decided on the basis of turnover. Small
taxpayers may thus either be exempt (turnover (Rs. 20 lakhs) or they may
opt for the Composition Scheme (turnover (Rs. 75 lakhs). The medium
and large taxpayers will have to file all GST Returns. The diagram below
would help us to get the concept of working of GST in a better way.

 All the taxpayers that are eligible for exemption will have the option of
paying tax with Input Tax Credit benefits through Voluntary
Registration.

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  The list of the exempted goods and services would be common for
the Centre and the States/U.T.s.

Working
The tax cycles for the Mid-Size & Large Taxpayers are different –

1. Firstly, the seller files GSTR 1 (before the 10th of the following
month) by recording all the sales
2. Then the buyer reviews the sales in GSTR 2A
3. The buyer would then approve whether the sales are legitimate or not
and file in GSTR 2 (before the 15th of the following month)
4. If the buyer modifies the sales that were earlier filed, then the seller
can see such kind of modifications in GSTR 1A and can approve or
disapprove

And thus finally when, both the buyer as well as the seller approve, GSTR
3 (before the 20th of the following month) is generated with the payment of
tax

Types of Taxes
The various types of taxes that are under GST are –

1. If the supply of the goods and the services are made within the state,
then the two types of taxes which are applicable are, the Central
Goods and Services Tax (CGST) and the State Goods and
Services Tax (SGST).

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 2. If the supply is made across the state, then Integrated Goods and
Services Tax (IGST) is applicable.

Cess
Cess will be chargeable on the Value of Supply for 5 years on the taxes on
certain specified goods and services. But in the case of import of goods
into India, cess would be levied but then collected on customs duties under
the Customs Tariff Act, 1975. The only exception is that no cess would be
levied by a taxpayer who opts for the composition scheme.

Import & Export

In the case of exports, the exports would be treated as zero-rated supply.
So, no tax is payable on the exports but Input Tax Credit benefits would be
allowed.

And

In the case of imports, the imports would be treated as inter-state

supplies. Hence, IGST would be applicable in addition to the customs
duties.

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How will GST impact the Retail Sector
Retail sector is an integral part of India’s economic system.
It is one of the booming sectors, which works across all kind of
industries. Retail sector is responsible for providing goods and
services in an effective way to consumers. Therefore, its
positioning in the present system needs to be understood in the
light of GST, which will not only open up a gateway for potential
markets to grow but also for existing retailers to grab benefit
from it.

Enlistment of benefits in Retail sector after GST:

Hitherto known tax structure imposed various kinds of excise
duties/taxes on almost all kind of goods and services. The new
tax regime is effectively calculated to prove beneficial in a
seemingly long run of business. The very fact that a long list of
taxes will be replaced by a single tax to promote the idea of ‘One
Tax, One Market, One Nation’, demonstrates that a call for
change in the taxation policy will incur benefits for all. This
proclamation seems to set the taxation rightly, in case the
effective takeaway from Goods and Services Tax (GST) turns out
to be positive. The four major ways in which Retail sector would
be impacted are-

(a) Increase in Circulation and outreach of all the goods and

services. This is primarily because taxes levied on crossing of the
state boundaries would be non-effective post-GST.

(b) Cascading of taxes would turn irrelevant in such a taxation

scenario. All the indirect forms of taxes would be reduced to zero
value. One tax call for the whole country would surely prove to be
a transformation in the economic view.

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(c) There would be an increment in the supply chain
management. The effectiveness of the retail activity would work
on a smooth and effective path after the introduction of GST.

(d) Above everything else, GST will facilitate unified input tax
credit. The design of the supply chains will be reworked so that
maximum benefit is to be taken from the taxation process by
availing tax credits. The supply chain network will also witness a
reformation given the fact that there will be a lot more
opportunities for cost saving in tune of 1%-1.15% of sales.

Retail business- Pre-GST and Post-GST:

Retail business is the backbone of the Indian economy and accounts for
about 10 percent of its GDP. The Indian retail market is estimated to
be US$ 600 billon and one of the top five retail markets in the world by
economic value. India is one of the fastest growing retail markets in the
world, with 1.2 billion people. Given such a growth rate in international
business, it is of utmost importance to bring new changes in the sector for
propagating its growth and outreach. Analysis of both the sides will help us
weigh the benefits of GST implementation. The drafted GST model law,
GST rules and its documentation reflects measures taken by Government
to make people GST ready.

In the Pre-GST phase, retailers were entitled to 30% indirect taxes such as
Value-Added Tax(VAT), Central State Tax(CST), excise duty, service tax
on warehousing, intra-state, inter-state, and more. But now in the post-GST
phase, everything getting replaced by a single tax marks a radical move.
On the face of it, it might take retailers a little time to understand the
technicality which goes into making of such a set-up. But ultimately, the
retail business will reach a new height. From storage to supply chain to
distribution to promotions to everything else which combines in the process
of retail business will be affected by GST. The flow from supplier’s end to
consumer’s end will work in transparency. Remodeling of each and every
strategy is the effective need of the hour. The complexity in the retail

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business will not be visible anymore if the business is carried on under
registration act of GST. The proper tax filing is of high importance in all of it.
Free-flow of goods across the nation is set to come into effect. The tax
burden on retailers will lessen as we would see how a simplified tax
structure will be brought into effect. The cost saved on maintenance of
warehouses in different states will initially reduce the input value, which
used in making of it available. Thus, all in all, post-GST regime seeks to
assert an effective and efficient channel for retail business. It propagates
better opportunities for growth not just for surviving segments and
industries but also for new retail business aspirants.

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5 RULES OF ‘GST’ FOR RETAILERS
The GST taxation has brought a lot of changes in the pricing strategy
of the commodities and product. This new tax amendment has made
business very simple as a range of indirect taxes has been submerged to
form a single provision. Almost every segment of the business has been
affected by this amendment.

The retail sector has been profoundly impacted by the GST taxation
amendment. In the previous year, the retailers had to face a lot of
confusions regarding this new concept. Moreover, the implementation of
the norms of the new tax regime took too much time to get introduced. The
confusion also raged among the consumers. Now, the confusion has been
eradicated to a huge extent and the effect is becoming clarified. The new
tax regime took a huge turn and witnessed a 2-crore registration. At this
point, every retailer needs to incorporate a record keeping and profound
accounting system. This cost around INR 5000-10,000 per month extra.

The organized retail segment is still less than 20% of the entire retail
industry. On the other hand, the e-commerce part of the retail industry is
just 7% of the total volume.

Here are the top 5 GST rules a retailer should know.

1. E-commerce as per GST

As per Section 43B(d) of the Model GST Law, e-commerce retail
platform is an electronic network via which receipt of a supply of goods and
services and fund and/or data transmission takes place. The consumers
find the products or services using the internet to make a buying decision
without physically visiting the brick and mortar store.

A person, who is supplying services or goods with his account, is not

considered as an e-commerce operator. On the contrary, a person, who is
providing knowledge and infrastructure for the supply of goods and service
for other businesses, is an operator. For an instance, Flipkart is an operator
when it is allowing the use of its platform for the other businessmen to cater
products. In the same way, Flipkart is not an operator when it is selling its
own products.

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2. Tax Collection at Source (TCS)

As per the GST rules, Section 43C(1) depicts that the operator of e-
commerce can collect or deduct a particular amount from the payable
amount to the supplier in accordance to the supplies done through the e-
commerce platform. This is called TCS.

3. Registration and threshold exemption

As per Section 19R/W, Schedule-III of Model GST Law, irrespective

of the evaluation of the supply chain, an e-commerce operator or a retailer
needs to register the business. All the retail business is liable to GST
registration.

There will be no relaxation regarding threshold exemption. As

mentioned earlier, irrespective of the supply chain valuation, the supplier
needs to register his business based on the same section of the law.

4. Tax replaced by GST

The implementation of GST has witnessed the replacement of
various tax regimes. The list of such taxes is mentioned below.

Central Excise Duty

Value Added Tax

Service Tax

Countervailing and Special Countervailing Duty

Entertainment

Entry

Luxury

Purchase

Lottery

Advertisement

Octroi

Short-term impact

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 The short-term effect of the GST tax regime will be inflation. The tax
rate under the new regime varies between 5% and 18%. The restaurants,
movie theaters, and other entertainment centers will increase the price of
their services. On the contrary, Liquor and petrol got exempted from the tax
regime. Many experts feel that this is a part of a capitalist conspiracy as
these two commodities are one of the major sources of revenue for the
government. The exemption of petrol will also make supply logistics
cheaper. This will help the retail industry to grow further.

5. Uniformity will prevail

Both the organized and unorganized retail players will be well

benefitted due to the one-stop tax solution. The uniformity of the tax regime
will make it more clarified and the tax credit will become more available for
the government.

The smaller retailers with a turnover within INR 50 Lakh can enjoy a
relaxation in account maintenance and tax payment. The threshold for
registration is INR 20 Lakh. E-commerce, on the other hand, will be very
much benefitted by the uniformity. The different state tax schemes will be
singled.

The benefits of GST regime will be visible soon enough. The

consolidated tax regime will reduce confusion and downtime to do
business, practically boosting all types of retail ventures.

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THE IMPACT OF ‘GST’ IN RETAIL MARKET
While GST has been implemented, let’s see what will be the impact
of GST on Indian Retail Industry and which changes will this industry need
to imbibe to become GST ready.

1. Less Taxes
In the pre-GST tax scenario, retailers are entitled to about 30%
indirect taxes such as VAT, CST, excise duty, service tax on warehousing,
Octroi and many more. GST will lessen the retailers’ tax burden as it will
streamline everything into single tax. The cascading of taxes will be done
away with and a simplified tax structure will be come into effect.

2. Free flow of goods across the nation

After GST implementation, state borders will be unconnected from
taxation and documentation point of view. This will result into free flow of
goods across the nation without any kind of barriers. GST will reduce the
complexity for retailers and make the distribution channel efficient.

3. Streamlined supply chain

GST will affect the warehouse networks of retail businesses. Retail
businesses will no longer require warehouses in every state they operate
due to abolition of CST under GST law. Logistics will become efficient too
as state border check posts will go irrelevant. Due to decrease in long
queues and wait time and free-flowing of goods across the nation, overall
lead time of retail businesses will also improve.

4. Gifts, free samples also taxable

GST law is based on supply of goods rather than manufacturing or
sales. Under GST, any supply without consideration will attract tax. Retail
sector comes up with many offers like buy one get one free or some
freebies on larger goods, every now and then. Once GST comes into
action, tax will be levied on such gifts too. This clause will affect
promotional activities of retail sector as under current taxation structure,
such goods are tax-free.

5. 4Changes in decision making

From supply chain to distribution to promotions, every strategy of
retail industry will be affected by GST. Retailers will have to re-think these

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strategies and re-model their network. Retailers may need to revamp the
pricing policy of their suppliers in view of enhanced credits that may be
available to suppliers in GST regime. Making necessary changes will make
it easy for them to comply with GST.

6. Growth of Retail Market

GST will unify the markets as there won’t be state boundaries to
hinder their business. GST will streamline their intra-state as well as inter-
state transactions. Retailers can expand their business beyond one state
with ease due to one-time registration of their business. This will also
contribute towards the growth of the retail market and help boost the
economy of the country.

7. Overall impact of GST on retail sector

Conclusively, the impact of GST on retail sector is going to be
positive from both taxation and operations point of view. Retail businesses
will flourish more, thus contributing to overall growth of Indian economy.
GST will depose total indirect taxes, upsurge supply chain efficiency and
facilitate seamless input tax credit. The end price for consumers will also
reduce because of GST. Except some clauses, GST will benefit retail
sector in a big way.

Reductions in Taxes:

The primary impact of GST will be a significant reduction of the tax burden on the
retailing sector. Under the previous tax structure, most of the retail products are subject
to various taxes like Excise Duty, CST, VAT, Service Tax, Octroi and Entry Tax. The
Input Tax Credit is available on VAT but not on the Service Tax and Import Duty. But
during the GST regime, taxation will be applicable from the manufacturer point to the
consumer point and Input Tax Credit will be available on every level. GST will make a
tremendous impact on Retail, and every business for that matter, by eliminating the
cascading effect of taxes. This will help the Retailers in exploring the boundaries of the
dynamic market, leading to a better growth.

More Opportunities and Increase in Competition:

In the previous tax scenario, different states imposed different VAT rates on the same
type of Goods and Services. Online commercial dealers list sellers who are charged lower
taxes, thus making the product cheaper than the local retail prices. The e-tailers
negotiate exclusive tie-ups and re-structure their transactions to extract maximum
benefits from tax arbitrage. But with the implementation of GST, there is going to be a
standard tax rate for every item and tax arbitrage will no longer be practicable. This will
deflate the gap between the online and offline sellers to the same level when pricing and
costing are concerned, thus creating healthy competition.

Tax on Promotional Schemes and Gifts:

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Retailers, offline or online, currently offer various marketing promotions, gifts and
schemes like ‘One plus one offer’, to boost their sales. Previously, the free products and
free samples are not accountable to Sales Tax. But as per the model GST law, any kind of
supply without any consideration will attract a certain amount of tax. When such
features will be included for taxation, it will cause an increase in the promotional costs
and also pose a challenge for the Retailers as they will have to adapt to the new
conditions and come up with better and more creative strategies to market their product
attractively.

Minimisation of Check-Post Related Compliances:

The Intra-state and Inter-state movement of goods is a very tiresome task and consumes
a lot of time and money, as there are a number of check-post compliances that have to be
carried out. But with GST, things will change. The primary objective of GST is to
transform India into a unified common market. This will provide a smoother and hassle-
free movement of goods within the State and across the State borders. However, the
model GST law does empower the Government to prescribe proper documents in the
case of movement of goods having a value above Rs50,000.

Uprooting of the Unregistered Traders:

In the case of offline sales, GST registration is only mandatory for the traders having a
turnover of Rs. 20 lakhs. But, if a trader wishes to sell through the online channels, he is
required to register himself on the GST portal, irrespective of the turnover. Thus, the
unregistered traders will be forced to move out of the online system. Consequently, all
the major sellers will register for GST and charge taxes at a common standard rate,
creating a level playing ground for all the sellers, in terms of pricing of a product. The
changing dynamics will prove to be a surmountable challenge for the Retailers and will
help them in outstretching the market boundaries, leading to a better growth.

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Benefits of GST on Retail Sector
The benefit of GST on retail sector will be huge. Indian Retail
sector is one the fastest growing industry in the world. It is expected to
grow to1.3 trillion USD by 2020, registering a CAGR (Compound Annual
Growth Rate) of 16.7% over the 5 years ranging from 2015-2020. India is
5th largest retail destination in the world. The retail sector is booming
everywhere be it metro cities or the Tier-II and tier-III cities. The
Government of India has introduced major reforms to attract FDI in the
retail industry. The government has approved up to 100 % FDI in single
brand retail and 51% in the multi brand- retail. All of these stats signify that
the retail sector is as dominant as ever and any reform in the country which
anyhow affects the working of the sector shall have a huge impact on it.
And GST is no ordinary tax reform. It is one of a kind reform which is
poised to change the scenario of taxation in the country and legitimately its
effects on the retail industry must be considered.

The followings are the benefits of GST on retail sector

 Reduced Taxes
GST will reduce the tax burden on retailers as they pay many
different forms of tax in the current scenario such as CAT, CST, Octroi,
service tax, and much more. GST will streamline everything into one
single tax so that it will be easier for the retailer to understand the taxation
and to pay it in one shot.

 Seamless Input Tax Credit

GST will reduce the burden of tax on the retail sector as it will set off
tax starting from the producer’s point to the customer point. GST will make
an impact on the flowing effect of taxes and help to streamline into one
category.

 Increased efficiency in supply chain

Since the retail business can be carried out in every state upon single
registration, the retailers will not have to maintain warehouses in every
state, and this will be very beneficial regarding cost to the retailer. The
transportation industry will flourish as they would carry more goods from
one state to the other as it will become easy to transfer goods under GST.
The lead time will also reduce in transporting the goods as the inter-state

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boundaries would be more free-flowing. GST will help the retail sector
become more efficient in their operations.

 Tax on promotional items and gifts

In the new GST model, any supply without consideration will attract
tax and therefore, everything will have to be accounted for. The retailers
would give out gifts and promotional items with products as a part of their
marketing strategy which used to be tax-free in the current taxation system.
When the GST gets implement, no such rule will be applicable and the
retails will have to pay tax on the gifts and promotional items as well,
therefore, re-think their promotional strategies

 Growth of Retail Market

GST will lead to the unification of markets as it will streamline the
state and the central tax and eliminate all the confusion of taxation in
different markets. The retailers can easily expand their business beyond
boundaries as they have to register their business only once and then can
carry operations in all the states. This will also contribute towards the
growth of the retail market and help boost the economy of the country.

 Better strategies
GST will force the retailers to re-think their supply chain strategies
and re-model their network as it will open a lot of doors and opportunities
for retailers to expand their business. It will give them the freedom to draft
better business strategies and implement it for further growth of the retail
sector.

 Reduce complications
The retailers would be able to carry out the business with more ease
as the taxation, and other policies would be streamlined under the new
GST rules, and they would not have to waste their time in paying various
taxes and waiting to fulfill all other policy requirements of the current
taxation system.

 Beneficial for start-ups

The retail sector would start attracting a lot of start-ups as they would
have to register their business only once and also claim the benefits of
taxation for start-ups under the new GST laws. They would also be able to

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carry out business operations more freely with the new policies in place
and would get more attracted to join the retail sector.

Conclusion of GST on retail sector

There are many more advantages of GST on retail sector under the
new GST laws and it would be a great boost for the retail sector as the
policies and taxation would be streamlines under one head. The
businesses would flourish more contributing to the growth of the retail
industry and in turn of the economy as they would be able to carry out the
activities without any hindrances, more freely, and be able to expand the
business into different states without worrying about the additional costs.
The supply chain will benefit tremendously as the cost of transport and
warehousing will reduce under the new GST laws and help the retailers
scale their profits, which could also lead to reduced prices for the final
consumer over a period of time. The retailer can directly pay the taxes
online and will not have to go through a middleman.

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Valuation of MRP Goods in GST Regime
The Revenue Secretary Dr. Hasmukh Adhia said that a Central Monitoring
Committee has been constituted to assess the situation of pricing and supply of
commodities, after the rollout of the Goods and Services Tax (GST). Addressing a
press conference in Delhi, Adhia said meetings are being chaired every week with
the aforementioned committee, headed by the Cabinet Secretary.

He said, “A committee has been constituted comprising 15 secretaries from

departments that are in direct contact with consumers, to monitor commodity pricing
and client groups. Although no field work is involved, officials will have to monitor
four to five districts along with the assigned Link officer”.

When queried about the initial feedback received after the implementation of GST,
Mr. Adhia revealed that the new taxation framework has been well received. He
further also adds that situation is being closely monitored by the all the competent
departments. “The GST has been well accepted. All state governments other than
Jammu and Kashmir have complied with all norms. I would urge that if there is any
difficulty, please give us feedback, since it is important for us to know. So far, no
problems have been detected,” told Hasmukh Adhia.

Example of
1.MRP valuation under GST
Let’s consider an example of ABC, a manufacturer, selling tools and valuation of
supply under gst hardwares as polishers, drills, spades etc. It sells a polishers to
XYZ a wholesaler. The MRP is Rs. 5,500 but XYZ sells it for Rs. 1000.

The invoice looked like

Polishers 1000
Add: Excise @ 12.5% 125

Subtotal 1125

Add: VAT @14.5% (on subtotal) 164

Total 1289

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2.Value of supply under GST

The value of goods or services supplied is the transaction value such that the price
payable, which is Rs 1,000 in the example. Suppose that CGST=9% and SGST= 9%

Polishers 1000
Add: CGST @9% 90

Add: SGST @9% 90

Total 1180

GST on MRP or Discounted Price

Responding to question raised on the Maximum Retail Price (MRP) of commodities
under the GST, Avinash K. Srivastava, Secretary-Department of Consumer Affairs,
clarified that all distributors and manufacturers must print the complete details of the
original and revised MRP on the product. “The retailers must furbish all details of
price and the revised rate. If there is an increase, an additional notification needs to
be sent out, apart from printing both rates on the product packaging,” he said.

Adding to above statement, Adhia said dealers registered under the GST
Composition Scheme do not have to show tax, while other registered dealers will
have to clearly show the tax split up. He also revealed that while commodities do not
attract any cess, but, vehicles crossing state borders will continue to be charged,
unless they have a national permit. “22 states have removed check posts so far, and
we are expecting the others to comply as well. The tax on vehicles is on crossing
borders, and not on the goods being transported. Therefore, that will have to be
paid,” said Adhia

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Page-21
Goods and Services Tax (GST) help consumer to save more..

The above line is true because in earlier law when we bought goods then we also
bought tax tax i.e knows as cascading effect also known as tax on tax ; but after
implementaion of GST we will buy goods not tax…whole tax whether it is of central
or state it will be adjusted of net off.

May be some goods go high rate due to hight tax rate but in totalty we will be
benifited by GST.

Retail business wil also be benifited by this because india is not a manufacturing
country maximum goods consumed here are from other countries ..in earlier law we
have no option to adjust the intersate tax (between two sate) so goods we bought
from delhi and consumed in U.P we also consume tax because tax on Delhi goods is
not adjustible in U.P vat.

Now GST erases this cascading effect tax on Delhi goods can be adjusted in U.P thats
why it is MAJOR TAX REFORM IN INDIA.

By applying the above views you can understand how retail business will be
benifited.

Below five factors will significantly change the dynamics of the retail
sector in India:

a. Reduced taxes – In the current tax structure, most of the retail products are
subject to 30 % indirect taxes on average. This includes excise duty, VAT, CST,
service tax on warehousing, consulting and rent, Octroi and entry tax. The main
impact of GST on retailers will be a significant reduction of the tax burden on the
retailers.

b. Seamless Input tax credit – In the current tax structure, input tax credit is
available on VAT but not available on service tax and import duty. In the proposed
GST regime, there will be set off on taxation starting from producer’s point to the
consumer point. GST will make an impact by eliminating the cascading effect of taxes
thereby reducing the total tax burden on the retail sector.

c. Increased Supply chain efficiency –Major impact of GST will be on the

warehouse networks of retail industries. As CST is abolished, Industries will have no
motivation to operate warehouses in each state wherever they operate. This will lead
to 20 % – 30 % consolidation of warehouses. Transportation will benefit due to state
boundaries becoming insignificant. The long queues and wait time at check posts and
state boundaries will be reduced further reducing the lead-time.
The impact of GST will be evident on supply chains, as their designs would be
efficiency-oriented and not in alignment with the taxation system.

d. Tax on gifts and promotional items – As per the model GST law, any supply
without any consideration will attract tax. It is a common practice in Indian retail
sector to offer free products for promotion or one plus one free offers. In the current
taxation system; these free products, samples and gifts were tax-free. Once GST is
implemented, such gifts will also be considered for tax and the retailers would have
to rethink their promotional strategy.

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e. Better Opportunities & Growth of Retail Market – Upon implementation
of GST, analysts predict unification of markets. Thus, biggest of the impacts of GST
will be in the widening of potential markets for the retailers. Retailers would be ready
to explore markets across diminished boundaries leading to better growth of the
retail market.

The impact of GST on retail sector will be very positive from both taxation and
operations point of view. Retail industries will have to re-assess their current supply
chain strategy and re-model their network. Supply chain network design will be a
critical activity for the retail industries as it offers the opportunity of cost saving in
tune of 1 % – 1.15 % of sales.

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