The retail industry is the fastest growing industry in India also in the world. The retail industry growth rate was 23% in 2017 in comparison to 2016 and is expected to grow at a higher rate in 2018.
A research says retail industry in India expected to see a growth of 1100 trillion US $ by 2020.
In the year 1990, the retail industry captured 23% of the total market and after 2000 it captured 43%. And with this growth rate, Indian retail industry is marching towards becoming the largest retail sector in the world.
Let’s take an example to depict the real growth of retail in India. In the year 2011, I have finished my graduation and at that time there was no shopping mall in my hometown (a rural place in the state Odisha). After 7 years i.e. in 2018, there is a lot of shopping mall emerged as the shopping hub. So, in these 7 years, the retail industry grows at a faster rate in India as well as worldwide.
E-commerce is booming as another growth factor for the retail industry. E-commerce or online shopping is becoming a trend among Indian youths and mostly among working people. If we take 100% of the total retail customers then 80% would be from online shopping.
Now let’s discuss how GST impact the retail industry
GST brings both some positive & negative impact on the retail sector. GST is a unified tax implemented by Govt. of India to make the taxation process simpler also to empower ease of doing business and give rise to more creative entrepreneurs.
Before GST retailers have to pay VAT, CST, Excise duty and other charges but after GST came into effect they have to only one tax despite the fact that tax percentage increased to a higher rate. To encourage retailers Govt approves 100% FDI.
First lets’ dig out the benefits GST brings to the retail sector:
Govt of India introduces GST with an aim to reform the old taxation system and to make it simpler. Since its implementation, GST has undergone various changes in its structure. Still its better than old tax, structure. Retail businesses also can avail composition scheme for smooth business operation.
Here are some benefits:
Higher threshold limit
During the VAT threshold limit was between 5-15lakh and in GST its 20Lakh. So, retailers with less turnover no need to pay tax and can do business freely.
Low Tax rate
In this new tax, structure retailers are paying low taxes in comparison with VAT. At the time of VAT 18% with other taxes paid by retailers while in GST it varies according to the product and product pricing but still it less than VAT. Tax reduction is the main positive impact or says good news GST gifted to retailers.
Easy return filing
Return filing is a process to claim the taxes paid by business to the Govt at the time of purchase. This return filing process is quite complicated and not transparent during VAT as Govt never asked for invoices or purchase details but during GST every business has to file GST returns with sales & purchase details. Return filing process became more transparent & easy also GST provides a quick refund. Currently including GSTR-3B companies have to file three other returns i.e. GSTR-1, GSTR-2, and GSTR-3.
But GSTR-3B is not mandatory for all there are some exceptional cases. Let’s find out who all can exempt GSTR-3B filing:
- Business falls under the composite scheme
- Persons who are not registered
- Unique identification holders
Quick & easy goods movement
GST council made E-Way bill compulsory for inter-state & intra-state goods transport. Govt. implemented e-way bill operation to make transportation seamless & easy by abolishing check post verification. E-way bill empowers retailers to do more business and manage inventory easily.
Revise business plan & strategy
In GST every goods & service are taxable even if promotional goods and services. In VAT promotional gifts, items & services were tax exempted. According to the new tax rules & regulations, retailers have to revise their business plans & strategies to promote their business also to generate more revenues.
Faster business growth
Under this GST regime, a business owner can get details of other businesses while doing any business dealings. GST introduces composition scheme to give the rating to a business as per its accordance with GST rules & regulations. As the tax structure became transparent, now retailers would be able to do more business between countries and within is country. GST will boost the growth of the retail industry.
These are some benefits GST has in its kit for the retail sector but there are also some disadvantages to this new GST tax structure.
Here are some disadvantages of GST for the retail sector in India:
Unable to understand
The main disadvantage of GST is, startups find it difficult to understand and comply with its rules & regulations. Except for composite taxpayers, others have to file monthly GST returns and need to update sales & purchase details on GST portal. Its time consuming and a little bit complicated for those who have less accounting knowledge.
As GST is mandatory for all businesses even a business with no transaction has to register under GST and can file nil returns. In case of late filing or non-filing, a business has to pay late filing charges and penalties. It means GST filing is mandatory for all. Small business & startup owners who have less knowledge on accounting they are finding it difficult t understand the rules. To resolve this issue they are hiring chartered accounts by paying more so for them its a loss and a complicated tax structure.
Online tax filing
GST return filing has to be done on its portal, which is web-based. Due to lack of internet knowledge & poor internet connection in the rural sector, it became difficult for business owners to file tax on time. It’s a major setback for GST.
Pay more tax
Under GST a business with a turnover above Rs.20 Lakh has to pay tax while in the VAT a business with turnover above Rs.1.5 Crore had to pay excise duty. So, in GST small businesses has to pay more tax. GST indeed a simple tax but creates more tax burden on small businesses & startups.
Indeed GST made business management simpler for Retailers but still, it has some loopholes. GST system sometimes breaks down and doesn’t accept any modification in return filing. Its been more than a year since GST implementation and still Govt doing changes in tax structure to make it more simple & easier. It’s a remarkable tax reform and we hope it will be less complex in the near future alongside encouraging business growth.