IMPACT OF GST ON MANUFACTURERS,DISTRIBUTORS

AND RETAILERS

A SUMMER INTERNSHIP REPORT

Submitted by

Shubham

Registration No: 11702536

in partial fulfillment of Summer Internship for the award of the degree of

BACHELOR OF BUSINESS ADMINISTRATION (HONS)

School of Business

LOVELY PROFESSIONAL UNIVERSITY

Phagwara, Punjab

July 25, 2019

1
2
 Acknowledgement

I would like to express my special thanks of gratitude to all those who have provided me with guidance and
assistance in doing this project.

I would like to thank CA SURAJ KUMAR, PARTNER OF JHA SHALIENDRA AND ASSOCIATES
for allowing me the opportunity to do this wonderful project and helping me to complete this project with his
wide experience and knowledge.

I Would like to thanks CA Ashutosh Ashish, Proprietor of A. Kashyap & Associates for helping me out in
the data collection of this project.

I would also like to thank all the employees of the Firm who provided me all the necessary information in
the completion of the project report.

Last but not the least, I would like to extend my thanks to MSOB, Lovely professional university,
phagwara for allowing me the opportunity for doing this internship.

3
 Executive Summary

Goods and Service Tax (GST) is implemented in india on july1,2017, which is regarded as a major change in
the taxation reform in India. It is a single destination based indirect tax, include all the central and state indirect
taxes which is imposed on value added to goods as well as services at each stage of the supply chain. The main
objective behind levying such a tax is to consolidate multiple indirect tax levies into a single tax, one taxation
system and to overcome limitations in the previous indirect tax structure of India further to bring efficiency in
the administration of tax.

GST subsumes a host of taxes like central exercise tax, VAT/ sales tax, service tax etc, excludes customs
duty, stamp duty, vehicle tax, road tax, excise duty on liquor, entertainment tax, toll tax etc. Value Added Tax
rates and regulations are different from state to state. whereas, GST brings in uniform tax system across all the
states. the taxes would be divided between the Central government and State government.

With the introduction of Goods and Services Tax (GST) virtually, it has made a huge impact on various
sectors in India. Many businesses in organized and unorganized segments have implemented GST which
seems to improve Indian economy by implementing the practices of new tax which has overridden the present
taxation system. Keeping this backdrop in mind, the paper addresses the broad perspective of GST in present
scenario of Manufacturing, Distribution & Retail business and the implementation of GST in the mentioned
Three sectors of business.

4
Ch. No Title page no.

1 Introduction 6

1.1 Research methodology 6

1.2 Source of data collection 7

1.3 Review of literature 7

2 Types of GST 8-9

3 Compliance involves in GST 10-11

4 Impact of GST on Manufacturer 11-12

5 Impact of GST on Distributors 13-14

6 Impact of GST on Retailers 14-15

7 Various Challenges faced by GST Tax payers 15-16

8 conclusion 16

9 References 16

10. Data collected on personal interview

5
Introduction

As tax is the necessary payment to be made to the government in lieu of service and infrastructure provided
by the government to its citizens, taxes are generally classified into two types (i) Direct Tax (ii) Indirect Tax.
Direct Taxes are the tax which are directly levied to the individual, corporates, real estate and stamp duty
whereas the indirect taxes are the taxes which are on the goods and services. in the above mentioned context
GST is included in second type where it is the system of taxation of expenses or use of goods and services that
is also a mechanism for collecting the revenue from the companies and individual and other bodies for the
purpose of finance. different government spendings especially in socio economic development and programs
which are running under the government scheme.

Goods and Service Tax is an Indirect Tax which has replaced various Indirect Taxes in India.

The Goods and Service Tax Act was passed in the Parliament on mar 29, 2017. The Act came into force on
1st July 2017.

Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied
on every value addition of goods and services.

In other words, Goods and Service Tax (GST) is an indirect tax levied on the supply of goods and
services. This law has replaced various indirect tax laws that previously existed in India.

Goods and Service Tax is one indirect tax for the whole entire country.

Tax slab under GST

1. GST Tax @ 5%

2. GST Tax @ 12%

3. GST Tax @ 18%

4. GST Tax @ 28%

Research Methodology

In this research, 5 samples of manufacturer has been observed and 10 samples of Distributors and retailers
each has been observed.
6
Convinence sampling has been used to study the impact of GST on the three mentioned sectors of business.

Source of Data collection

Primary data :

This data has been collected through the observations and direct personal interview from the Chartered
Accountant.

Secondary Data :

This data has been collected through the articles and blogs of Chartered Accountants, Company Secretaries
and various GST professionals.

Literature review

 Das and Gupta (2004): They stated that the tax compliance can be improved by implementing simple
reforms in personnel policy in Indian income tax .He concluded that the GST will lead to higher tax
compliance and lower tax evasion by Indians
 Gang and Ira N (2000): They concluded that the tax structure India, some tax structure changes were
implemented to reduce tax evasion.
 Sijbren (2013): Sijbren and others suggested, A modern goods and services to alleviate the problems
of India’s current indirect tax system

Comparison Between Old and New Regime

TRANSACTION NEWE REGIME OLD REGIME

SALES WITHIN CGST+SGST VAT+CST/EXCISE REVENUE WILL BE SHARED BETWEEN
THE STATE STATE AND CENTRAL GOVERNMENT
SALES TO IGST CST+EXCISE/SERVICE THERE WIL BE ONLY ON ECENTRAL TAX,
ANOTHER TAX REVENUE WILL BE SHARED ACORDING
STATE TO DESTINATION OF GOODS

7
Advantages Of GST

GST has mainly removed the Cascading (multiple) effect on the sale of goods and services. Removal of
cascading effect has impacted the cost of goods. Since the Goods and Service Tax regime eliminates the tax
on tax, the cost of goods decreases. GST is also mainly technologically driven. All activities like registration
of GST, return filing, application for refund and response to notice needs to be done online on the GST Portal;
this accelerates the processes.

What are the components of GST?

There are three taxes applicable under this system: CGST, SGST & IGST.

 CGST: Collected by the Central Government on an intra-state sale (Eg: transaction happening within
punjab)
 SGST: Collected by the State Government on an intra-state sale (Eg: transaction happening within
punjab)
 IGST: Collected by the Central Government for inter-state sale (Eg: punjab to bihar)

The following is the list of indirect taxes in the pre-GST regime:

 Central Excise Duty

 Duties of Excise
 Additional Duties of Excise
 Additional Duties of Customs
 Special Additional Duty of Customs
 Cess
 State VAT
 Central Sales Tax
 Purchase Tax
 Luxury Tax
 Entertainment Tax
 Entry Tax
 Taxes on advertisements
 Taxes on lotteries, betting, and gambling

8
What changes has GST brought in?

In the pre-GST regime, every purchaser including the final consumer paid tax on tax. This tax on tax is called
Cascading (multiple) Effect of Taxes.

Goods and Service Tax has removed this cascading effect as the tax is calculated only on the value-addition
at each stage of the transfer of ownership.

Types of GST

1. Central Goods & Service Tax (CGST)

CGST is the centralized part of Goods and Service Tax that subsumes the present central taxations and levies-
Central Sales Tax, Central Excise Duty, Services Tax, Excise Duty under Medical & Toiletries Preparation
Act, Additional Excise Duties Additional Custom Duty and other centralized taxations.

Central Goods and Service Tax is applicable on the supply of goods and services which can be amended
periodically by a specialized body under the central government. The revenue collected under CGST belongs
to the central government directly. The input tax is given to the state governments which can be utilized only
against the payment of CGST.

2. State Goods & Services Tax (SGST)

SGST is an important part of Goods and Service Tax. Its full form is State Goods & Services Tax as per the
2016 GST bill. Various taxations and levies under the state authority are now subsumed by SGST as one
uniform taxation, which includes the amalgamation of State Sales Tax, Luxury Tax, Entertainment Tax, Levies
on Lottery, Entry Tax, Octroi and other taxations related to the movement or sale of commodities and services
under state authority through one uniform taxation- SGST.

Revenue collected under SGST belongs to the State Government directly. However, the working structure of
the state governing body will be supervised by the central government. Each state has their own State Authority
to collect SGST.

9
3. Integrated Goods & Services Tax (IGST)

Goods and Service Tax focuses on the concept of one tax, one nation. IGST stands for Integrated Goods and
Services Tax. it is basically charged on the supply of goods and services from one state to another state.

For example, if the supply of goods and services occurs between Punjab and Bihar, IGST will be applicable.
the inter-state trade and commerce activities that involve the movement of commodities and services are levied
with an integrated tax (IGST) under the GST regime. The Government of India i.e central government will
collect the revenue under IGST.

Union Territory Goods & Services Tax (UTGST)

the union territories of India are accounted under a specialized taxation called Union Territory Goods and
Services Tax as per the GST regime. It has subsume the various taxations, levies and duties with one uniform
taxation in Union Territories as well. Delhi (India’s Capital Territory), Chandigarh, Dadra & Nagar Haveli,
Andaman & Nicobar Islands, Daman & Diu, Lakshadweep and Puducherry are the prominent union territories
in India. UTGST will account for all the taxations under these union territories in India.

Compliance involved for GST Taxpayers

COMPOSITE DEALER
UNDER GST

FORM TYPE DETAILS FREQUENCY DUE DATE

Details of inward
supplies made
available to the
GSTR 4A QUARTERLY ─
recipient registered
under composition
scheme.
Quarterly return for 18th of succeeding
GSTR 4 QUARTERLY
GST. month
Consolidated details
of quarterly returns 31st December of
GSTR 9A ANNUALY
filed along with tax next financial year
payment details.

10
 REGULAR DEALER UNDER
GST

FORM TYPE DETAILS FREQUENCY DUE DATE

Outward sales by 10th of succeeding
GSTR 1 MONTHLY
business. month
Auto-populated details
11th of succeeding
GSTR 2A of inward supplies made MONTHLY
month
available to the recipient.
Purchases made by 15th of succeeding
GSTR 2 MONTHLY
Business. month
Details of outward
supplies as added, 20th of succeeding
GSTR 1A MONTHLY
corrected or deleted by month
the recipient.
GST monthly return
20th of succeeding
GSTR 3 along with the payment MONTHLY
month
of amount of tax.
Communication of
acceptance,
GST ITC 1 discrepancy or MONTHLY ─
duplication of input tax
credit claim.
Notice to a registered
taxable person who fails
GSTR 3A ─ ─
to furnish return under
section 27 and 31.
31st Dec of next
GSTR 9 GST Annual Return. ANNUALLY
financial year

Impact Of GST On Manufacturing Sector in India

Manufacturing sector of india has been growing steadily since the early 2000s, by creating new jobs and
boosting the economy of the country. The Goods and Services Tax regime has the potential to contribute that
growth, especially to run a small business. With the help of easier Goods and Service tax structure and
simplified compliance, it effect on the interstate sales, the GST can help the business to cut the various costs
and can become more competitive.

Reduced Production Cost

Before the introduction of GST Regime, cascading taxes were a major problem for manufacturing companies.
Every time when the products are bought or sold products, taxpayers had to deal with multiple taxes, including
VAT, entry tax, and central sales tax. Because of this way these duties were arranged, a company ended up
paying tax on other taxes.
11
consequensly, this resulted in higher costs and compound taxes on raw materials.
GST abolished these cascading taxes, automatically saving the money of taxpayers. It also provides the input
tax credit to help lower the tax bill. Under the old system, many of the taxes paid were not available as a credit
for the taxpayers. When a taxpayer pays GST on inputs such as raw materials and factory equipment, next
taxpayer can deduct that amount from the taxes that first taxpayer owe. That way, taxpayers are only paying
GST on the value that are added to the supply chain.

Easier Interstate Buying and Selling

In India’s old tax regime, interstate transactions were a hassle. When any person bought or sold across state
lines, person had to deal with complicated state and national taxes. For busy small business owners, this system
usually led to three choices for them:

1. taking time to figure out the paperwork yourself,

2. spending money on a tax professional,

3. avoiding interstate transactions altogether.

Under GST, the process is much easier. No matter where your vendors and customers are located within the
taxation boundary of the country, taxpayer still pay the same GST rate. This gives taxpayer the freedom to
choose the vendors with the best prices. If any person work in punjab and find a great deal on raw materials
in bihar, one can take it without worrying about checking bihar’s state taxes. This can cut costs and make one
more competitive in the domestic market.

Improved Logistics

When the GST regime eliminated or abolished previous state taxes, it also solved a major problem for
manufacturers: expensive logistics. Before GST, manufacturer truckers could be stalled for hours in long lines
at state border checkpoints, increasing overall expenses. The unpredictable times which were spend on long
que at the check post created a logistical nightmare, and delayed shipments led to production slowdowns and
missed delivery deadlines.
After GST regime was implemented, many state border checkpoints were immediately shut down.
manufacturer can now use the e-way bill system to register shipments and pay taxes online. This means they
can save valuable time on logistics and spend less money on fuel. Plus, since they can better predict when raw
materials will arrive, it’s easier to avoid costly production delays.

12
Although the Goods and Service Tax affects each part of the manufacturing business industry differently, the
overall outlook is positive. As manufacturer business adjusts to the simplified system, they can save money
and increase sales to new customers across India and the world.

Impact of GST on Distributors/Wholesellers

As we have seen that GST is a boon to the Indian economy as it increases the GDP of the country by 2%-3%
which in turn increases the no. of taxpayers and leads to increase in tax revenue for the government. GST is
positively affecting the Distributors or Wholesalers in the following way:

1. Goods and Service Tax is a unified tax that brings benefits to the distributor or wholesaler as it avoids
the cascading effects of tax and simplifies the compliance procedure and open opportunities to
consolidate suppliersGST is also expecting to cut down the cost of goods manufactured and distributed
in India which in turn benefit the end consumer
2. Goods and Service Tax bring one unified standard rate which is charged on all product all over India
which removes the hurdles of large variances and different tax rates prevailed in VAT
3. Goods and Service Tax harmonizes central and state tax administration which in turn reduce
duplication and compliance cost.
4. Goods and Service Tax automatize the compliance procedure which reduces errors and increase
efficiency
5. Goods and Service Tax reduces the additional duty, CVD, special additional duty components of
customs duty
6. Goods and Service Tax removes excise duty concepts which results in more manufacturing as GST is
levied at the time of sale/supply of product rather than at the time of dispatch of products from the
factory and that leads to more distribution and wholesale of the products
7. In Goods and Service taxation event will shift from manufacture, sale or provision of services to supply
of goods and services hence branch transfer would be constituted as supply and would be taxable
however eligible for full credit.
8. Goods and Service Tax made provision for removing the imposition of entry tax or octroi across India
which indirectly benefits the wholesaler/distributor.
9. Goods and Service Tax has widened the tax base, which is necessary for lowering the tax rates and
helps in eliminating the classification disputes.
10. Goods and Service Tax replaces the most indirect tax in India which indirectly helps
distributors/wholesalers to lower their tax burden.

13
 11. In Goods and Service Tax there is common formats for a tax return, payments, refund etc. Traders
operating in multiple geographical location across India will find it easy to compliance.
12. Goods and Service Tax nullify the cascading effect which lower down the price of goods and leads to
increase in revenue trickling down to the distributors as the dealers pass on the benefit of reduced tax.
13. In Goods and Service Tax, the burden of tax will be equally divided among the whole supply chain
which includes the wholesaler and distributors through lower tax rates by increasing the tax bases and
minimizing the exemptions.

Impact of GST on Retailers.

GST provides the following mentioned benefits to retailers and retail shoppers in the country.

Lower Taxes

GST effectively replaces all the various indirect taxes being charged to the supply of retail products. Before
GST regime introduction, retailers had to pay multiple taxes, including VAT, CST, service tax, excise duty,
etc, amounting to around 30% of the product cost. After GST, there is only one tax, varying from 5 to 28% on
different products. GST has also reduced the cascading of taxes as the credit for input taxes can be now
claimed by retailers.

Input Tax Credit

Unlike the previous tax regime, GST has the provision of input tax credit, in which a retailer can claim credits
for the tax previously paid by him on the purchase of inputs. This not only saves tax but also it reduces the
cascading effect of taxes.

Reduced Complications

The less number of taxes means less complexity. Also, GST is based on digital tax system, that means retailers
can plan and file the returns online without having to manage a lot of physical documents, accounts, etc.

14
Ideal For Startups

The Government has already announced tax rebates for entrepreneurs and startups. With GST getting relieve
of the complications associated with the retail sector, it is inevitable that budding startups would tap into this
opportunity.

Better opportunities and growth of market

The biggest impact is widening of market. It would be beneficial for the taxation and operation point of view.
Industries have to re-asses their supply chain and remodel their network.

Various challenges faced by the GST Taxpayers

 Lack of clarity on provisions (rules and regulations), as the forms and GST provisions are keep on
changing, tax payers and practitioners faced a lot of problems in gathering information required for
filling of returns.
 Taxpayers/practitioners are facing problems like refresh issues, errors in loading the pages etc and
unable to file returns on the last dates due to the technical glitches and in efficient of GSTN portal as
it is unable to support the huge data

 Taxpayers are facing issues related to the figures of Input Tax Credit (ITC), as pre-populated in table
8A of Form GSTR-9; do not match with the figures as appearing in their Form GSTR-2A. As figures
of ITC in GSTR-9 is auto populated and depends on Form GSTR-1 of the supplier. If supplier won’t
file/submit GSTR-1 properly or if GSTR-1 of supplier is filed after 30 April 2019 for the FY 17-18,
then input credits of FY-17-18 don’t reflect in GSTR-9 of the company.
 Turnover for filing Form GSTR- 9C: Form GSTR-9C is to be filed by all those taxpayers whose
aggregate turnover has exceeded Rs 2 Cr in a financial year. Turnover of complete year i.e. from 1st
April, 2017 to 31st March, 2018 has to be taken into account for calculating the turnover. For example,
if a taxpayer has a turnover of Rs. 2.1 Cr for the period 1st April, 2017 to 31st March, 2018 and a
turnover of Rs. 1.9 Cr for the period 1st July, 2017 to 31st March, 2018, then the taxpayer is required
to file form GSTR- 9C.
 Users getting error message while using Microsoft excel version higher than 2007 while preparing
Form GSTR 9C and while filing Part B of Form GSTR-9C, Auditors are facing issues/errors while
providing their membership numbers.

15
 Reconciliation is the main challenge for tax payers while filing GSTR-9 and 9C, as they have to
remember all the returns, amendments, and adjustments that were done through the year to deal with
errors in annual returns.

conclusion
 From the above mentioned context it can be concluded that, the impact of GST on retail sector that
GST has laid the path for a more organized and transparent retail sector. And government can also
examine the evasion of tax easily by using various online tools. And also abolished the black
marketing.

 It can be concluded that, the introduction of GST has made the ease of taxation for the all sectors
specially for the manufacturing sectors as it has subsumed various indirect taxes and also abolished
cascading effect of indirect taxation.

 Gst is boosting all the three mentioned sectors in a positive way.

So, overall GST can be considered as a game changer move in Indian economy. Which will
produce slow growth for short run because of change in the whole taxation system but in a long run it will
be very beneficial for Indian economy.

References

 Cnossen, Sijbren (2013):”Preparing the way for a modern GST in India” in “International Tax and
Public Finance”,Aug 2013 Springer Science & Business Media (New York).
 Das-Gupta, Arindam; Gang, Ira N (2000): “Decomposing Revenue Effects of Tax Evasion and Tax
Structure Changes” in “International Tax and Public Finance”,March, 2000, Springer Science &
Business Media(New York).
 Das-Gupta, Arindam; Ghosh, Shanto; Mookherjee, Dilip, (2004):” Tax Administration Reform and
Taxpayer Compliance in India” in “International Tax and Public Finance”,September, 2004, Springer
Science & Business Media(New York).
 Cleartax.com
 Gsthelplineindia.com

16