Impact of GST on Retail Sector

June 19th, 2017 Intech Systems GST Law and ERP, Microsoft Dynamics

Retail sector is one of the key pillars for Indian economy and it accounts for around 10% of GDP. GST will usher in wide changes in various industries and sectors and Retail industry is not an exception.
While GST implementation is now just few days away, 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.

Less Taxes

In the current 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.

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.

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.

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.

Changes 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 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.

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.

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.
In case you are still in dilemma about impact of GST on your business and how to be GST ready, feel free to reach the GST experts at Intech.