A Study on impact of GST on Retailers

A first review report

(Submitted by B, Vijayalakshmi, Roll No: 1619MBA0091, Reg. No: 68616100087)

1 NEED FOR THE STUDY

Retail sector is one of the key pillars for Indian economy and it accounts for around 10
per cent of GDP and around 8 per cent of the employment. India is the world’s fifth-
largest global destination in the retail space. While GST implementation was happened
just few months ago, it will be helpful to study the impact of GST on Indian Retailers
and Retail Industry. GST will usher in wide changes in various industries and sectors
and Retail industry is not an exception. In the previous tax scenario, retailers are entitled
to about 30% indirect taxes such as VAT, CST, excise duty, service tax on warehousing,
Octroi and many more. From the various articles and discussion about GST, GST
experts says, that the impact of GST on retail sector is positive from both taxation and
operations point of view 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. 

Having known that Indian retail market is divided into “Organised Retail Market” which
is valued at $60 billion which is only 9 per cent of the total sector and “Unorganised
Retail Market constitutes the rest 91 per cent of the sector. Organised retailing, in India,
refers to trading activities undertaken by licensed retailers, that is, those who are
registered for sales tax, income tax, etc. Unorganised retailing, on the other hand, refers
to the traditional formats of low-cost retailing, for example, the local corner shops,
owner manned general stores, paan/beedi shops, convenience stores, hand cart and
pavement vendors, etc. The unorganised retail shops source their products from a chain
of middlemen who mark up the product as it moves from farmer or producer to the
consumer. Finally, most transactions at unorganised retail shops are done with cash,
with all sales being final.

Hence it is must to understand the concept of Goods and Services Tax since our tax
structure has been transformed. And as described earlier Retail is one of the most
important sector to which every person or individual is dependent on. And It is one of
the important sector of our country. Therefore it is needed to study the impact of new
tax structure called GST in retail Industry. Being more precise, In this project let us
learn about the impact of GST on small retailers.

2 REVIEW OF LITERATURE

GST IN INDIA: A KEY TAX REFORM

Monika Sehrawat (M.com), Upasana Dhanda (NET –JRF), Delhi University, INDIA
Sehrawat et. al., Vol.3 (Iss.12): December, 2015

Consumption and productions of goods and services is undoubtedly increasing and

because of multiplicity of taxes in current tax regime administration complexities and
compliance cost is also accelerating. In this research paper, Author concludes that, a
simplify, user -friendly and transparent tax system is required which can be fulfilled by
implementation of GST. GST will colligate most of current indirect taxes and in long
term it will lead to higher output, more employment opportunities and flourish GDP by
1-1.5%. It can also be used as an effective tool for fiscal policy management if
implemented successfully due to nation-wide same tax rate.

GOODS AND SERVICES TAX IN INDIA: A WAY FORWARD

Nitin Kumar, Volume 3, No 6 (2014) 

The Goods and Service Tax (GST) is one of the biggest taxation reforms in India, the
decision on which is pending in Parliament since March 2011. The central idea behind
this form of taxation is to replace existing levies like value-added tax, excise duty,
service tax, and sales tax by levying a comprehensive tax on the manufacture, sale and
consumption of goods and services in the country. GST is expected to unite the country
economically as it will remove various forms of taxes that are currently levied at
different points. This paper presents the background, silent features and the impact of
GST in the present tax scenario in India.

GOODS & SERVICE TAX - Impact analysis on various sectors

Ankit Jain, Siddhartha Havelia
May 2017

GST would have significant impact on the way businesses operate and one of the
sectors which would be significantly impacted by GST is the retail sector. At previous
tax system, the CVD on import of goods, excise duty on goods manufactured in India,
CST on inter-state procurement of goods and service tax on input services, are a cost to
the retailers. However, the GST charged on the aforementioned transactions would be
creditable. This would eliminate the cascading effect of taxes and could lead to
reduction in effective tax cost for various products. But, a higher rate of GST on certain
products could offset the benefit of increased credit availability mentioned above and
lead to higher tax cost.

At previous tax structure, the products given free of cost are not liable to sales tax.
However, in the GST regime, supply of goods by one person to another without
consideration could also be liable for taxation. This would lead to increased cost of
promotion and also pose a challenge as regards the valuation to be adopted for
calculating GST on such goods.

GST impact on retail sector-Buy one, get one free schemes set to get taxed
Pramod Banthia, partner and Feneel Shah, associate director (indirect tax), PwC
India.

GST would have significant impact on the way businesses operate and one of the
sectors which would be significantly impacted by GST is the retail sector. The key
impact area of GST on the retail sector has been highlighted in this article. Below are
the key area of GST which impacts the Retail sector. Increased availability of input tax
credit. Further, for the industry, free flow of credits could culminate into simpler supply
chain. Inter-state stock transfer of goods from one branch to another is presently not
liable to tax. However, the same would be liable to GST. While this would not be a cost
in the system, this would increase the working capital requirements of the retailers. In
the GST regime, supply of goods by one person to another without consideration could
also be liable for taxation. This would lead to increased cost of promotion and also
pose a challenge as regards the valuation to be adopted for calculating GST on such
goods.

In addition to the above, some of the other impact areas are transition of existing
credit under GST, applicability of GST on sale of gift vouchers / coupons, determining
the correct place of supply in order to pay the taxes to the appropriate government, to
name a few.

Basic Concepts and Features of Good and Service Tax In India

Girish Garg
Volume 2, Issue 2, Pages 542-549, Feb 2014.

GST is leviable on all supply of goods and provision of services as well combination
thereof. All sectors of economy whether the industry, business including Govt.
departments and service sector shall have to bear impact of GST. All sections of
economy viz., big, medium, small scale units, intermediaries, importers, exporters,
traders, professionals and consumers shall be directly affected by GST... One of the
biggest taxation reforms in India -- the Goods and Service Tax (GST) -- is all set to
integrate State economies and boost overall growth. GST is leviable on all supply of
goods and provision of services as well combination thereof. All sectors of economy
whether the industry, business including Govt. departments and service sector shall
have to bear impact of GST. All sections of economy viz., big, medium, small scale units,
intermediaries, importers, exporters, traders, professionals and consumers shall be
directly affected by GST... One of the biggest taxation reforms in India -- the Goods and
Service Tax (GST) -- is all set to integrate State economies and boost overall growth.

A Research Paper on an Impact of Goods and Service Tax (GST) on Indian

Economy.
Shefali Dani, Director, GLS (J.P.Shah) Institute of Business Administration,
GLS University, India
Bus Eco J 7: 264. doi: 10.4172/2151-6219.1000264, 2016

The proposed GST regime is a half-hearted attempt to rationalize indirect tax

structure. More than 150 countries have implemented GST. The government of
India should study the GST regime set up by various countries and also their
fallouts before implementing it. At the same time, the government should make an
attempt to insulate the vast poor population of India against the likely inflation due to
implementation of GST. No doubt, GST will simplify existing indirect tax system and
will help to remove inefficiencies created by the existing current heterogeneous
taxation system only if there is a clear consensus over issues of threshold limit,
revenue rate, and inclusion of petroleum products, electricity, liquor and real estate.
Until the consensus is reached, the government should resist from implementing
such regime.

The Impact of GST (Goods and Services Tax) on the Indian Tax Scene
Aurobinda Panda and Atul Patel, KIIT School of Law, KIIT University, Bhubaneswar,
Orissa India, 751024

Despite of the economic slowdown, India's Fast Moving Consumer Goods (FMCG) has
grown consistently during the past three – four years reaching to $25 billion at retail
sales in 2008. Implementation of proposed GST and opening of Foreign Direct
Investment (F.D.I.) are expected to fuel the growth and raise industry's size to $95
Billion by 2018. The enumeration of benefits casts a welcome setting for GST. Proving
GST as a superior and sufficient system depends upon the structure it is designed into
and the manner of implementation. While it serves to be beneficial set up for the
Industry and the Consumer, it would lead to increase in revenue to Government.

Goods and Services Tax in India

RAVISHU RAJ, IMS UNISON UNIVERSITY DEHRADUN.
April 4, 2017.

No doubt, GST will simply existing indirect tax system and will help to remove
inefficiencies created by the existing current heterogeneous taxation system only if
there is a clear consensus over issues of threshold limit, revenue rate and inclusion
of petroleum product, electricity, liquor and real estate. Until the consensus is
reached, the government should resist from implementing such regime.

GST Reforms and Intergovernmental Considerations in India

Satya Poddar, Ehtisham Ahmad.
January 30, 2009.

The Empowered Committee describes the GST as “a further significant

improvement – the next logical step - towards a comprehensive indirect tax reforms
in the country.” Indeed, it has the potential to be the single most important initiative
in the fiscal history of India. It can pave the way for modernization of tax
administration - make it simpler and more transparent – and significant
enhancement in voluntary compliance. However, these benefits are critically
dependent on a neutral and rational design of the GST. They would require much
research and analysis, deft balancing of conflicting interests of various
stakeholders, and full political commitment for a fundamental reform of the system.
Achieving the correct choice is then a political economy balancing act that takes into
account the technical options and the differing needs and constraints of the main
partners. Fortunately, there is a very substantial consensus among all stakeholders
in the country for a genuine reform.

MOVING TO GOODS AND SERVICE TAX IN INDIA: IMPACT ON INDIA’S GROWTH

Dr.Balwinder Bedi, Mr. Kavish Sharma, Subharti Institute of Management and
Commerce, Meerut
May-2017 Volume- 4, Issue-3

Implementation of a comprehensive GST across goods and services is expected,

ceteris paribus, to increase India’s GDP somewhere within a range of 0.9 per cent
to 1.98 per cent. The corresponding changes in absolute values of GDP over 2015-
16 is expected to be between Rs. 86,221 crore and Rs. 94,322 crore, respectively.
The additional gain in GDP, originating from the GST reform, would be earned
during all years in future over and above the growth in GDP which would have been
achieved otherwise. GST would lead to efficient allocation of factors of production.
The overall price level would go down. It is expected that the real returns to the
factors of production would go up. Our results show gains in real returns to land
ranging between 0.42 and 0.82 per cent. Wage rate gains vary between 0.68 and
1.33 per cent. The real returns to capital would gain somewhere between 0.37 and
0.74 per cent.

Transition to Goods and Services Tax (GST) Regime: Rationale and Impasse
SANJOY ROY
The NEHU Journal, Vol XIV, No. 1, January - June 2016, pp. 51-67

With a view to arriving at consensus on the design of GST, the final rate structure
particularly RNR and other key issues, the Central government needs to speed up
the process and assure commensurate compensation of revenue loss to the States
due to introduction of GST. It is not an exaggeration that the ‘flawless’ GST is one of
the most important reform agenda which can provide a new impetus to economy of
the country and attain inclusive growth. But the need of the hour is that the Central
government and the all political parties should come together shunning their political
compulsions and take proactive roles for an agreeable solution so that
logjam/stalemate in Rajya Sabha may be overcome soon and enable the
government to implement a ‘flawless GST’ in India, a win –win proposition for all.

3.1 PRIMARY OBJECTIVE

To study the impact of GST on small retailers.

3.2 SECONDARY OBJECTIVES

• To find the variation in operating funds.

• To evaluate the financial position of the retailers during the pre-GST
and post-GST period.
• To examine the impact of GST on sales volume.
• To evaluate the retailer’s mark-up and margin.
• To suggest various changes in price to satisfy the customer.

4 METHODOLOGY

Data requirement is fulfilled by collecting data using questionnaire. The questions

are framed in way to obtain the responses in order to achieve the objectives i.e. to
study the impact of GST on retailers. The sampling framework is restricted to small
retailers.
Tools to be used:
 Hypothesis Testing
 Preparing thesis

5. WORK DONE SO FAR

 Completed the study on basics of GST.
 Studied various research papers and articles related to GST impact on
Retailers and Retail industry.

6 WORK TO BE DONE
 To prepare the questionnaire.
  Should collect the data and related information.
 Need to classify and analyse the data.
 Determine the Hypothesis.
 To prepare the report.

7 LIMITATION

 This project is limited to only Retail industry and also particularly about
the small retailers.
 This study focusses the small retailers of Chennai.

8 EXPECTED DELIVERABLES

Suggestions on various Pros and Cons of GST implementation and methods

to maximize the margin of the retailer and also meeting up the customer
satisfaction.

REFERENCES

[1] Monika Sehrawat, and Upasana Dhanda, “GST IN INDIA: A KEY TAX REFORM”
International Journal of Research – Granthaalayah, Vol. 3, No. 12(2015): 133-
141.
[2] Nitin Kumar, 2017, GOODS AND SERVICES TAX IN INDIA: A WAY FORWARD,
Volume 3, No 6 (2014)
[3] Ankit Jain, Siddhartha Havelia, May 2017, GOODS & SERVICE TAX -
Impact analysis on various sectors.
[4] Pramod Banthia, partner and Feneel Shah, associate director (indirect tax),
PwC India, GST impact on retail sector-Buy one, get one free schemes set to
get taxed
[5] Girish Garg, IJSRM volume 2 issue 2 feb 2014 [www.ijsrm.in], Basic
Concepts and Features of Good and Service Tax In India.
[6] Dani S (2016) A Research Paper on an Impact of Goods and Service Tax
(GST) on Indian Economy. Bus Eco J 7: 264. doi: 10.4172/2151-
6219.1000264
[7] Panda, Aurobinda and Patel, Atul, The Impact of GST (Goods and Services
Tax) on the Indian Tax Scene (July 10, 2010). Available at
SSRN: https://ssrn.com/abstract=1868621 or http://dx.doi.org/10.2139/ssrn.1
868621
[8] Raj, Ravishu, Goods and Services Tax in India (April 4, 2017). Available at
SSRN: https://ssrn.com/abstract=2946241 or http://dx.doi.org/10.2139/ssrn.2
946241
 [9] Dr.Balwinder Bedi, Mr. Kavish Sharma, May 2017, MOVING TO GOODS AND
SERVICE TAX IN INDIA: IMPACT ON INDIA’S GROWTH, Volume- 4, Issue-3,
www.ijermt.org
[10] SANJOY ROY, January - June 2016, Transition to Goods and Services Tax
(GST) Regime: Rationale and Impasse, The NEHU Journal, Vol XIV, No. 1,
January - June 2016, pp. 51-67

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