The Game Changer

GST is ex­pected to play a piv­otal role in ex­pand­ing the re­tail sec­tor to USD 1.3 tril­lion by 2020, at a CAGR of 16.7 per cent spread over a span of five years from 2015–2020. Here’s how GST will trans­form the re­tail sce­nario in In­dia.

Progressive Grocer (India) - - Contents - By Nis­hank Goyal The writer is CEO, Mas­ters In­dia, a GST Su­vidha provider so­lu­tion com­pany.

GST is ex­pected to play a piv­otal role in ex­pand­ing the re­tail sec­tor ex­po­nen­tially in the days ahead.

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 GST im­ple­men­ta­tion and it has al­ready brought more than six mil­lion busi­nesses across in­dus­tries un­der its am­bit with more to come in the fu­ture.

The In­dian re­tail sec­tor, which is the fastest grow­ing in­dus­try in the world, is ex­pected to ben­e­fit hugely from this po­ten­tial game changer. GST is ex­pected to pro­pel the growth of the In­dian re­tail and there are many ev­i­dent ben­e­fits, which the in­dus­try ex­perts fore­see: re­duced taxes, en­hanced sup­ply chain ef­fi­ciency, seam­less in­put tax credit, and stretch­ing of re­tail mar­kets. Re­tail is pen­e­trat­ing rapidly in Tier-ii and III cities of In­dia (5th largest re­tail des­ti­na­tion in the world). The in­dus­try is well sup­ported by FDI poli­cies, which al­low 100% FDI on sin­gle brand and 51% in the multi-brand re­tail.

Re­duced taxes

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 shrink 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 com­plex­i­ties and chal­lenges in the re­tail sup­ply chain: long queues and com­plex doc­u­men­ta­tion at check posts, which added to the trans­ac­tion time and costs. All of this has now been con­sid­er­ably re­duced with the one-na­tion-one tax be­ing en­forced. The in­dus­try has started wit­ness­ing lower costs, re­duced wait­ing time and min­i­mal lo­gis­tics in the over­all sup­ply chain, 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 ex­tended bound­aries re­sult­ing in a hefty drop in 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 re­tail­ers by elim­i­nat­ing the cas­cad­ing ef­fect of taxes, thereby re­duc­ing the over­all tax bur­den.

Stretch­ing of re­tail mar­kets

GST 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 can now sell any­where with a sin­gle GST regis­tra­tion.

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. It will ben­e­fit re­tail­ers by elim­i­nat­ing the cas­cad­ing ef­fect of taxes, thereby re­duc­ing the over­all tax bur­den.

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 will see new laws per­tain­ing to in­voices cre­ation, which are as fol­lows: • 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. • In­voice above Rs. 50,000 should have the cus­tomer ad­dress. • In­di­vid­ual in­voice de­tails are not re­quired for re­turn fil­ing. A con­sol­i­dated fil­ing will suf­fice. • Sale through e-com­merce op­er­a­tor has to be re­ported per op­er­a­tor. GST ben­e­fits on In­dian re­tail will strengthen and fuel the growth of the sec­tor ex­po­nen­tially and have a rip­ple ef­fect on the econ­omy.

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