Impact of GST On Retail Tailors 69 Pages

IMPACT OF GST ON RETAIL SECTOR
A project submitted to
University of Mumbai for partial completion of the degree of
Master in Commerce
Under the Faculty of Commerce
SUBMITTED BY
NISHANT VIJAY ATWAL
ROLL NO : 215839
Under the Guidance of
PROF. MAYURI KAMBLE
JEEVANDEEP SHAIKSHNIK SANSTHA POI’S

ART’S, COMMERCE AND SCIENCE COLLEGE, GOVELI
2021-2022
CERTIFICATE
This is to certify that Mr. Nishant Vijay Atwal. Has worked and duly completed
his Project Work for the degree of Master in Commerce under the Faculty of
Commerce in the subject of Accountancy/ Management and his project is entitled,
Impact of GST on Retail Sector under my supervision. I further certify that the
entire work has been done by the learner under the guidance and that no part of it
has been submitted previously for any Degree or Diploma of any University.
It is his own work and facts reported by her/ his personal finding and investigations.
Signature
PROF. MAYURI KAMBLE
Date of Submission:
ACKNOWLEDGEMENT
To list to who all helped me is difficult because they are so numerous and the depth
is so enormous.
I would like to acknowledge the following as being idealistic channel and fresh
dimension and completion of project.
I take this opportunity to thank the University of Mumbai for giving me chance to
do this project.
I would like to thank my Principal, Dr. K.B. Kore and our for providing the
necessary facilities required for completion of this project.
I take this opportunity to thank our Co-ordinator Prof. for his moral support and
guidance.
I would also like to express my sincere gratitude towards my project guide

Prof. Mayuri Kamble whose guidance and care made the project successful.
I would like to thank my college library for having provided various reference
books and magazines related to my project.
Lastly I would like to thank each and every person directly or indirectly helped me
in the completion of the project, especially my Parents and my peers who
supported me through out of my project.
Nishant Vijay Atwal

TABLE OF CONTENTS
Chapter No. Title Page no.
 Abstract 1
Chapter No. 1 Introduction 2-6
Chapter No. 2 Research Methodology 7-11
Chapter No. 3 Literature review and the critical issue 12-23
Chapter No.4 Data analysis, Interpretation and presentation 24-59
Chapter No.5 Conclusion and Suggestions 60-63
 Bibliography 64
 Annexure 65
ABSTRACT
Tax authority is the body responsible for implementing and governing the
tax laws in India. They are held responsible for tax assessing, tax collecting and
tax administering processes. The main objective of this project is to examine the
impact on GST on Retail Sector. The methods of data collection are based on
secondary sources and field survey by the researcher. Furthermore, the study
analyses, suggestion and recommendation for the problems highlighted. Goods and
Service Tax is a comprehensive tax levy on manufacture, sale and consumption of
goods and services. GST is termed as biggest tax reform In Indian Tax Structure. It
will not be an additional tax, it will include central excise duty, service tax
additional duties of customers at the central level, VAT, central sales tax,
entertainment tax, octroi, state surcharge, luxury tax, lottery tax and other
surcharge on supply of goods and services. The purpose of GST is to replace all
these taxes with single comprehensive tax, bringing it all under single umbrella.
The purpose is to eliminate tax on tax. This paper will throw light on GST its
features and also impact of GST on various sectors.
Impact of GST on Retail Sector

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CHAPTER NO 1: INTRODUCTION OF GST
The term ‘Tax’ is derived from Latin word ‘Taxare’ that means to estimate.
In India, a direct tax practice was prevailed across various industries. From July
1st, 2017, GST came into being which is a comprehensive tax regime levied on
manufacturing, sales and consumption of products and services. Introduction of
GST has merged both centre and state tax into a unified tax system across nation.
This new tax regime which has cascading effects on the economy which seems to
be testing time for India for ease of business in the supply chain systems.
GST has become buzzword across the nation, which has created a sense of
transformation of businesses yet to get clarity in various sectors. In retail industry,
business has undergone dramatic changes both in organized and unorganized
retailing in Tier-I cities and Tier-II cities of India. As it is highly fragmented in
nature, the country is going to experiment with Goods and Services Tax with new
tax regime which has cascading effects on the economy. In this context, Retailers
are facing challenges in terms of handling merchandise across categories which in
turn has effect on their bottom line of business.
According to various sources of market research agencies, the definition
holds as follows GST is defined as a new tax regime that is currently levied on
products and services across India. Further, it is a uniform indirect tax which has
replaced many of taxes such as Excise duty, service tax, additional duties of excise
and custom duty taxes and surcharges on products and services. Likewise, there
are new definitions of GST found in academic literatures.
This paper addresses the rudimentary aspects of GST and particular to
retail stores.
Introduction of the Value Added Tax (VAT) at the Central and the State
level has been considered to be a major step – an important step forward –in the
globe of indirect tax reforms in India. If the VAT is a major improvement over the
pre-existing Central excise duty at the national level and the sales tax system at the
State level, then the Goods and Services Tax (GST) will indeed be an additional
important perfection – the next logical step – towards a widespread indirect tax

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reforms in the country. Initially, it was conceptualized that there would be a
national level goods and services tax, however, with the release of First Discussion
Paper by the Empowered Committee of the State Finance Ministers on 10.11.2009,
it has been made clear that there would be a “Dual GST” in India, taxation power –
both by the Centre and the State to levy the taxes on the Goods and Services.
Almost 150 countries have introduced GST in some form. While countries such as
Singapore and New Zealand tax virtually everything at a single rate, Indonesia has
five positive rates, a zero rate and over 30 categories of exemptions. In China, GST
applies only to goods and the provision of repairs, replacement and processing
services. GST rates of some countries are given below.
Goods and Services Tax is an indirect tax which has replaced many indirect taxes
in India such as the excise duty, VAT, services tax etc. The Goods and Service Tax
Act was passed in the Parliament on 29th March 2017 and came into effect on 1st
July 2017. Goods and Services Tax Law in India is abroad, multi-stage,
destination-based tax that is levied on every value addition. GST is a single
indirect tax for the entire country. Under the GST regime, the tax levied at every
point of sale. In the case of intrastate sales, Central GST and State CST are
charged. All the sales related to inter-state are chargeable to the Integrated GST.
Goods and services are divided into five different tax slabs for collection of tax,
they are 0%, 5%, 12%, 18% and 28%. . The GST replaced the existing multiple
taxes levied by the central and state government. The introduction of GST is an
important step in the field of indirect tax reforms in India. By amalgamating a
large number of Central and State taxes into a single tax, GST will mitigate the ill
effects of cascading or double taxation in a major way towards achievement of
common national market.

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Country Rate of GST
10%
Australia
19.6%
France
5%
Canada
19%
Germany
5%
Japan
7%
Singapore
25%
Sweden
15%
New Zealand

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World over in almost 150 countries there is GST or VAT, which means tax
on goods and services. Under the GST scheme, no distinction is made between
goods and services for levying of tax. In other words, goods and services attract
the same rate of tax. GST is a multi-tier tax where ultimate burden of tax fall on
the consumer of goods/ services. It is called as value added tax because at every
stage, tax is being paid on the value addition. Under the GST scheme, a person
who was liable to pay tax on his output, whether for provision of service or sale of
goods, is entitled to get input tax credit (ITC) on the tax paid on its inputs.
INTRODUCTION TO CGST ACT, 2017
In India we adopted dual GST model. In this model both Centre and State
levy GST simultaneously when a transaction in intra State. The GST Council in its
11th meeting held on 4th March, 2017 approved the “draft Central GST” bill which
makes provisions for levy and collection of tax on intra-State supply of goods
Services or both by the Central Government.
The Union Government presented the central goods or service tax bill,
2017 in Lok Sabha on 27th March, 2017 and the same was passed by Lok Sabha on
29th March, 2017. The Rajya Sabha passed the bill on 6 th April, 2017 and was
assented by the president on 13th April, 2017.
The Act is applicable All over the India including Jammu & kashmir
(Source of introduction Book by ICSI)

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DEFINITION OF GST
Under Article 366 of the Constriction, Goods and Services tax (GST)
means any tax on supply of goods, or Services or both except taxes on the supply
of the alcoholic liquor for human consumption.
TYPES OF TAX SYSTEM IN INDIA.
Tax is the major source of financial charges to impose by Government of

India, on income of commodity and activity. Government imposed 2 types of tax
for person. i.e. Direct and Indirect e.g.
 Direct Tax – Income Tax and Wealth Tax etc.

 Indirect Tax – Goods and Service Tax (GST).

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CHAPTRER NO. 2 RESEARCH METHODOLOGY
2.1. OBJECTIVES OF THE STUDY
It is a single indirect tax for the whole nation, one which will make India a
unified common market. It is a single tax on the supply of goods and services, right
from the manufacturer to the consumer. The GST Bill was introduced in Lok Saba
in 2009 by UPA government but they failed to get it passed. The NDA government
introduced a ‘slightly modified’ version of the GST Bill in the Parliament and both
the Houses passed it. Through GST, the government aims to create a single
comprehensive tax structure that will subsume all the other smaller indirect taxes
on consumption like service tax, etc. Touted to be a major game changer, in the
words of Union Finance Minister Arun Jaitley ‘it will lead to the financial
integration of India’. Currently, tax rates differ from state to state. GST will ensure
a comprehensive tax base with minimum exemptions, will help industry, which
will be able to reap benefits of common procedures and claim credit for taxes paid.
Following are the objectives of the study:
 To study the implementation of GST business practices
 To understand the concept of GST.

 To obtain a comprehensive overview of consumer’s and retailer’s awareness and
perceptions of GST.
 To find out the impact of GST on sales of retailers.
 To analyze the impact of changes in the tax rates of fast moving consumer goods
on consumers.
 To cognize the concept of GST To study the features of GST
 To evaluate the advantages and challenges of GST
 To furnish information for further research work on GST
1. To Study the effect of GST on Small Retailers.
2. To study the impact of GST on small Retailers.

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3. To study the limitations/difficulties faced by Small Retailers.
III. Hypothesis: H0: GST has no significant impact on Small Retailers.
2.2. SCOPE OF THE PROJECT
IMPACT OF GOODS AND SERVICE TAX ON RETAIL

SECTOR
There are two types of impact of GST on Retail Sector......

A. Positive Impact of GST on Retail Sector
B. Negative Impact of GST on Retail Sector
 Impact on taxation part
Under the existing regime of indirect taxes the burden of indirect taxes on
65%-70% of items is around 30% and sometimes it goes beyond that also. This
figure of 30% includes excise 12.50% on 80% of the items, VAT 14.50% on 55%
of items, entry tax, octroi etc. When we are paying indirect taxes to the tune of
30% or so under GST it will come down definitely. At this point of time I am not
in a position to comment upon the rate of tax going to be applicable but the RNR
report given by Govt. suggests below mentioned rates.
Sr. No. Class of goods Commodities covered Rate of tax

1. Basic need items Milk, wheat, fruits etc. Nil*
2. Precious metals Gold, diamond, silver etc. 2%-6%
3. Lower rate goods Steel, cement, iron etc. 12%
4. Standard goods Garments, watches etc 18%
5. Luxury goods SUV cars, tobacco, aerated 28%
drinks etc.
* As replied by union FM in Rajya sabha while answering question of members on
122nd constitutional amendment bill on 03-08-2016. The rates include both CGST
and SGST.
So looking at the above table and burden of existing indirect taxes (30%)
what you think about incidence of tax under GST? In my mind under GST there

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will be no tax on tax which is causing distortion and artificial inflation on the
prices of goods. Overall in my opinion the burden of tax will reduce significantly
as compared with existing system where there is tax on tax.
Benefits of GST on Retail Businesses
With the introduction of GST in India, there is an adverse effect which has
resulted in inconvenience for the customers though there is lot of benefit in long
term gains of business. It is noteworthy to mention that customers can get rid of
indirect taxes such as Value added Tax, Central Sales Tax, Service Tax and excise
taxes etc., which has resulted in simplified tax policy in India.
The following are the benefits seen in the retail business.
 It eradicates cascading effects of taxes i.e., tax on tax.

 The lower prices for certain product categories are resulting
in high demand.
 Due to decrease of burden of taxes on manufacturing, the prices may be
decreased
 The increased manufacturing activity will result in more
opportunities if consumers have affordability in buying
products.
 The whole Indian marketplace can be unified which may
result in decrease of business costs.
 It can help seamless movement of products throughout
states which helps in decreasing the transaction charges of
enterprises.
 Due to GST, there is wide scope for E-commerce to penetrate the
market.
 GST has an effect on Foreign Direct Investment which can
gain confidence from foreign investors.

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 GST helps in ease of doing business and elevate scalability of business
All most every industry body are “fully prepared" for implementation of the
new indirect tax regime, while commending the government’s efforts towards its
rollout. The nationwide GST will overhaul India's convoluted indirect

taxation system and unify the over $2 trillion economy with 1.3 billion people
into a single market.
The medium-term impact of GST on macroeconomic indicators is expected to
be extremely positive. Inflation will be reduced as cascading of taxes will be
eliminated. India would move many notches up the global ease of doing ladder by
this single, but the most important tax reform in the country.
1. Lower Taxes
2. Availability Input Tax Credit
3. Reduced Complications
4. New Promotional Strategies
5. Ideal For Startups
6. Phasing out of CST will brings efficiency in supply chain
7. Place of supply in case of retail sector
8. Growth of retail market
India has adopted dual GST instead of national GST. It has made the entire
structure of GST fairly International Journal of Management and Applied Science.
India has adopted dual GST instead of national GST. It has made the entire
structure of GST fairly but the government has proposed to compensate for those
losses for a period of 5 years.
1. Proposed GST Rate Is Higher Than VAT

2. Dual Control
3. Loss Incurred By the Manufacturing States
4. Transitional challenges for retail sector
5. Gifts, free samples also taxable under GST

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6. Valuation challenges for retail sector under GST
7. Tax rates will play critical role for industry
8. Matters of serious consideration for retail sector
Critical issues in trade incentive and discounts:

Trade incentives and discounts that are allowed after the supply of goods have been affects
shall become part of transaction value on which tax is paid by the supplier of goods. The
incentives such as yearend sale discount, festival sales, turnover discount etc. are normally
given after supply and cannot be linked to specific invoices will now become part of
transation value and tax has to be paid. This is a serious matter of representation for the retail
industry before the law gets its final shape.

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CHAPTER NO 3: LITERATURE REVIEW
Girish Garage (2014) highlighted upon the objectives of GST, possible
challenges and threats and then, opportunities GST brings in strengthening the
economy.
Jaspreet Kaur (2016) has thrown light on GST, its features and also effect
of GST on prices of goods and Services. According to him electronic goods,
restaurant bill, SUV’S and diamond, jewellery, textile are going to be cheaper and
costlier respectively. He also highlighted that implementation of GST is expected
to narrow the large indirect tax differences between organized and unorganized
sector.
Raj Kumar (2016) analyzed and compared the proposed GST framework and
current taxation system, described its effect on employment and various sectors.
Milandeep Kour, Kajal Chaudhary, Surjan Singh, Baljinder Kaur (2016)
highlighted upon the effect of GST after its implementation, difference between
GST and present indirect tax and what will be challenges and benefits of GST.
Dr. Badar Alam Iqbal (2017) states the very purpose of GST is to take a
shift from existing complex, multi layers and cascading indirect tax mechanism
which permits tax set off across the value chain in terms of both commodities and
services. By implementing GST, cost of output will go down resulting into
enhancing the degree of competitiveness of Indian goods in the context of imports
and further increase the margin of profit.
Upendra Gupta (2017) highlighted upon the key features and Benefits of
GST in a comprehensive manner. He emphasized on how will GST benefit and
empower citizen and who is liable to pay GST.
Sachin Abda (2017) highlighted that GST would be a major move towards
Indian economy as since independence India has faced some of the issues because
of complex indirect tax system, this complexity is assumed to be resolved by GST
structure replacing all state and central government taxes into one unique tax.
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The above literature review presents the research paper details conducted
by the person has been shown. In this project report, the project presents the details
regarding the implementation of GST business practices, the concept of GST, a
comprehensive overview of consumer’s and retailer’s awareness and perceptions
of GST, the impact of GST on sales of retailers, the impact of changes in the tax
rates of fast moving consumer goods on consumers, the concept of GST To study
the features of GST, the advantages and challenges of GST, information for further
research work on GST.
The project report on impact of the GST in Retail sector enlightens us
regarding the various part of its impact whether it is positive or negative. The study
also provides the knowledge to the individual regarding the possibility of it.
R. Vasanthagopal (2011) studied, “GST in India: A Big leap in the Indirect
Taxation system” and concluded that switching to GST from current complicated
indirect tax system in India will be a positive step in booming Indian economy.
Success of GST will lead to its acceptance by more than 140 countries in world
and a new preferred form of indirect tax system in Asia also. Nitin kumar (2014)
studied, “Goods and Services Tax- A way Forward” and concluded that
implementation of GST in India help in removing economic distortion by current
indirect tax system and expected to encourage unbiased tax structure. Mrs. Poonam
(2017) in her study stated that the introduction of GST would be a very significant
step in the field of indirect tax. The cascading or double taxation effects could be
reduced by combining many central and state taxes. Consumer’s tax burden will
reduce to 25% to 30% after introduction of GST. After introduction of GST Indian
products would become more competitive in the domestic and international
markets. This tax would instantly encourage economic growth.
Ruggeri G.C. and Bluck. K (1990) have studied that the Canada Federal
Government implemented the GST as a replacement of the Manufacture’s Sales
Tax (MST) in 1989. The study has focused the comparison between the MST and
VAT. They found that VAT is more regressive than of MST and at the same time
GST i9s also found to be more regressive than MST. This weakness of GST can be
reduced if Tax rate will be in a progressive form which indicates lower income
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credit financed by a highincome class pay surtax or higher GST rate.
Raman S (2010), Migration to GST: Preparedness and level of Knowledge,

Understanding, Application and Skills of Human Resources in the Government
and the Industry. In this paper, the author has conducted a primary research to
know the opinions or the suggestions of top officials, middle- level tax officials,
tax department staff, trade and industry, professionals and the general public. And
the author also discusses GST in different countries, recent developments in GST.
Amol Agarwal(2011) has studied the impact of GST on the Indian
economy. In his study, he mentioned that Dr. Vijay Kelkhar, chairman of the 13th
Finance Commission cited the work of renowned Tax economist Prof. Charles
McLure, who identified six characteristics of a well-designed GST in a federal
system as given like this;
 Uniform rate of Taxation within a given jurisdiction, ideally at a single rate
 Sales would be Taxed under the destination principle
 Low cost of compliance and administration
 Each level of Government to set its own Tax rate subjects to agreed floors
 A substantively common Tax base for Central and State Governments
 Substantial Co-operation in Tax administration between all levels of
Government.
Vijay Kelkar added the first two are important for economic reasons, the
third for the administrative while the fourth is for a political reason along with the
last two operates a system of multilevel finance that we have in our country. These
principles should be adopted while designing GST in our country as well.
Vasanthagopal(2011) in the article GST in India. A Big leap in the Indirect
Taxation System discussed the impact of GST on various sectors of the economy.
The article further stated that GST is a big leap and a new imputes to India’s
economic change.
Garg (2014) in the article named Basic Concepts and Features of GST in
India analyzed the impact and GST on Indian Tax scenario and concluded that it
will strengthen the free market economy.

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Kumar (2014) studied in the article GST in India: A way Forward
background, silent features and concluded with the positive impact of GST on
present complex tax structure and development of common man and national
market.
Parkhi did an exploratory research in an article GST in India; the changing

face of the economy and stated that implementation of GST is a changing face of
India and the government is well equipped for that which is a symptom of the fast
paced economy.
Kumar (May 2014) studied “Goods and Service Tax in India-A way
forward” and found that GST will be levied on all the goods and services except
those exempted, dual model of GST will be there, which will include Central GST
(CGST) collected by Center and State GST (SGST) collected by State. Central tax
such as Central excise tax, additional excise duty, service tax, surcharges,
countervailing duty, special additional duty of customs and state tax such as
VAT/Sales tax, entertainment tax, luxury tax, taxes on lottery, betting and
gambling, state cesses and entry tax not in lieu of Octroi to be subsumed. GST will
not be charged on exports, it will only be charged on imports and Input Tax Credit
will be available on the GST paid on import on goods and services. Some
advantages of GST are higher revenue efficiency, easy compliance, and reduction
of prices, improved competitiveness and better control on leakage.
ADVANTAGES OF GST
1. GST eliminates the cascading effect of tax
GST is a comprehensive indirect tax that was designed to bring the indirect
taxation under one umbrella. More importantly, it is going to eliminate the
cascading effect of tax that was evident earlier. Cascading tax effect can be best
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described as ‘Tax on Tax’.
2. Higher threshold for registration
Earlier, in the VAT structure, any business with a turnover of more than Rs
5 lakh (in most states) was liable to pay VAT. Please note that this limit differed
state-wise. Also, service tax was exempted for service providers with a turnover of
less than Rs 10 lakh.
Under GST regime, however, this threshold has been increased to Rs 20
lakh, which exempts many small traders and service providers.
Let us look at this table below:
TAX THRESHOLD LIMITS

Excise 1.5 crores
VAT 5 lakhs in most states
Service Tax 10 lakhs
GST 20 lakhs (10 lakhs for NE states)
3. Composition scheme for small businesses
Under GST, small businesses (with a turnover of Rs 20 to 75 lakh) can

benefit as it gives an option to lower taxes by utilizing the Composition scheme.
This move has brought down the tax and compliance burden on many small
businesses.
4. Simple and easy online procedure
The entire process of GST (from registration to filing returns) is made

online, and it is super simple. This has been beneficial for start-ups especially, as
they do not have to run from pillar to post to get different registrations such as
VAT, excise, and service tax. Our Clear Tax GST software is already on a roll
filing GST returns.

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5. The number of compliances is lesser
Earlier, there was VAT and service tax, each of which had their own
returns and compliances. Below table shows the same:
TAX RETURN FILING

Excise Monthly
Service Tax Proprietorship/ Partnership-Quarterly Company/ LLP- Monthly
(Different for different states)
VAT Some states require monthly returns over a threshold limit.
Some states like Karnataka require a monthly return
Under GST, however, there is just one, unified return to be filed. Therefore,
the number of returns to be filed has come down. There are about 11 returns under
GST, out of which 4 are basic returns which apply to all taxable persons under
GST. The main GSTR-1 is manually populated and GSTR-2 and GSTR-3 will be
auto-populated.
6. Defined treatment for E-commerce operators

Earlier to GST regime, supplying goods through e-commerce sector was
not defined. It had variable VAT laws. Let us look at this example:
Online websites (like Flipkart and Amazon) delivering to Uttar Pradesh had
to file a VAT declaration and mention the registration number of the delivery
truck. Tax authorities could sometimes seize goods if the documents were not
produced.
Again, these e-commerce brands were treated as facilitators or mediators

by states like Kerala, Rajasthan, and West Bengal which did not require them to
register for VAT.
All these differential treatments and confusing compliances have been

removed under GST. For the first time, GST has clearly mapped out the provisions

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applicable to the e-commerce sector and since these are applicable all over India,
there should be no complication regarding the inter-state movement of goods
anymore.
7. Improved efficiency of logistics
Earlier, the logistics industry in India had to maintain multiple warehouses

across states to avoid the current CST and state entry taxes on inter-state
movement. These warehouses were forced to operate below their capacity, giving
room to increased operating costs.
Under GST, however, these restrictions on inter-state movement of goods

have been lessened.
As an outcome of GST, warehouse operators and e-commerce aggregators

players have shown interest in setting up their warehouses at strategic locations
such as Nagpur (which is the zero-mile city of India), instead of every other city on
their delivery route.
Reduction in unnecessary logistics costs is already increasing profits for

businesses involved in the supply of goods through transportation.
8. Unorganized sector is regulated under GST
In the pre-GST era, it was often seen that certain industries in India like
construction and textile were largely unregulated and unorganized.
Under GST, however, there are provisions for online compliances and
payments, and for availing of input credit only when the supplier has accepted the
amount. This has brought in accountability and regulation to these industries.
9. Challenges for implementing GST System

Post GST has made industries in India to face big challenges to switch over to the new tax
regime to be implemented. Broadly, there are several challenges given below that gives brief idea to the
business fraternity across the nation to be aware of GST tax regime.
A) It is found through the study that there are various changes taking place in administration at state
and central government level.

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B) Implementing GST has given new shape to the taxation system as well as economy of India
which is commonly known as Unified Taxation system which has several adjustments to be done to the
existing tax regime
C) It is understood from the various literatures that GST being consumption based tax system, the
respective states in India with higher consumption of Products and Services can lead to better returns or
profits.
D) Indian business systems have to face huge transformation of businesses across different verticals.
E) It is testing time or trial for many organizations as GST implementation comprises of Multiple
channels starting from Manufacturers to wholesalers to distributors, retailers and then to consumers. In
this context, it takes time to understand the entire system as it is introduced newly and overridden the
existing Tax regime in India.
F) As India is transforming to Digital Business, it is big challenge for the Government at State level
and Central level to integrate the Information Technology infrastructure with the businesses across
industries. This takes enormous time and understanding the existing business and migrating to e-business
as many current businesses are yet non-digital in nature.
10. Benefits of GST on Businesses
With the introduction of GST in India, there is an adverse effect which has resulted in
inconvenience for the customers though there is lot of benefit in long term gains of business. It is
noteworthy to mention that customers can get rid of indirect taxes such as Value added Tax, Central Sales
Tax, Service Tax and excise taxes etc., which has resulted in simplified tax policy in India. In this line, the
changes are reflected in various product categories as presented in Table 1. The following are the benefits
seen in the retail business.
 It eradicates cascading effects of taxes i.e., tax on tax.
 The lower prices for certain product categories are resulting in high demand as presented in Table 1.
 Due to decrease of burden of taxes on manufacturing, the prices may be decreased
 The increased manufacturing activity will result in more opportunities if consumers have affordability in
buying products.
 The whole Indian marketplace can be unified which may result in decrease of business costs.
 It can help seamless movement of products throughout states which helps in decreasing the transaction
charges of enterprises.
 Due to GST, there is wide scope for E-commerce to penetrate the market.
 GST has an effect on Foreign Direct Investment which can gain confidence from foreign investors.

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DISADVANTAGES OF GST
1. Increased costs due to software purchase
Businesses have to either update their existing accounting or ERP software

to GST-compliant one or buy a GST software so that they can keep their business
going. But both the options lead to increased cost of software purchase and
training of employees for an efficient utilization of the new billing software.
ClearTax is the first company in India to have launched a ready-to-use

GST software called Cleartax GST software. The software is currently available
for free for SMEs, helping them transition to GST smoothly. It has truly eased the
pain of the people in so many ways.
2. Being GST-compliant
Small and medium-sized enterprises (SME) who have not yet signed for
GST have to quickly grasp the nuances of the GST tax regime. They will have to
issue GST-complaint invoices, be compliant to digital record-keeping, and of
course, file timely returns. This means that the GST-complaint invoice issued must
have mandatory details such as GSTIN, place of supply, HSN codes, and others.
ClearTax has made it easier for SMEs with the ClearTax BillBook web
application. This application is available for FREE until the end of September and
is an easy solution to this problem. This will help every business to issue GST-
compliant invoices to their customers. These same invoices can then be used for
return filing through the ClearTax GST platform.
3. GST will mean an increase in operational costs
As we have already established that GST is changing the way how tax is
paid, businesses will now have to employ tax professionals to be GST-complaint.
This will gradually increase costs for small businesses as they will have to bear the
additional cost of hiring experts.
Also, businesses will need to train their employees in GST compliance,

20
further increasing their overhead expenses.
4. GST came into effect in the middle of the financial year
As GST was implemented on the 1st of July 2017, businesses followed the
old tax structure for the first 3 months (April, May, and June), and GST for the rest
of the financial year.
Businesses may find it hard to get adjusted to the new tax regime, and some
of them are running these tax systems parallelly, resulting in confusion and
compliance issues.
5. GST is an online taxation system
Unlike earlier, businesses are now switching from pen and paper invoicing
and filing to online return filing and making payments. This might be tough for
some smaller businesses to adapt to.
Cloud-based GST billing software like the ClearTax GST Billing

Software is definitely an answer to this problem. The process for return filing on
ClearTax GST is very simple. Business owners need to only upload their invoices,
and the software will populate the return forms automatically with the information
from the invoices. Any errors in invoices will be clearly identified by the software
in real-time, thus increasing efficiency and timeliness.
6. SMEs will have a higher tax burden
Smaller businesses, especially in the manufacturing sector will face

difficulties under GST. Earlier, only businesses whose turnover exceeded Rs 1.5
crore had to pay excise duty. But now any business whose turnover exceeds Rs 20
lakh will have to pay GST.
However, SMEs with a turnover upto Rs 75 lakh can opt for the
composition scheme and pay only 1% tax on turnover in lieu of GST and enjoy
lesser compliances. The catch though is these businesses will then not be able to
claim any input tax credit. The decision to choose between higher taxes or the

21
composition scheme (and thereby no ITC) will be a tough one for many SMEs.
Transitional challenges for retail sector:

The model GST law contains a detailed chapter on transitional provisions wherein
many transitional possibilities have been covered as per the wisdom of lawmakers. Migration
of registration from existing law to new law, carry forward of tax credits shown in returns,
refunds pending in previous law etc. As per our understanding following critical issues have
not been addressed while drafting transitional provisions: If supplier has removed goods on
30th day of March 2017 or 31st March which is received by customer on say 01st day of
April 2016 or later on. What will be the status of tax credit in this specific case ? This has not
been discussed anywhere in model GST law. This is a matter of representation for industry
and needs serious consideration at the time of finalization of law. On careful reading of
provisions given in model law credits which are part of return shall be taken into GST
regime. The portion of excise duty which is embedded in closing stock of retailer at their
outlets, depots will suffer higher tax again when these goods will be sold into GST regime.
Serious representations should be made in this regard by industry to ministry otherwise such
a big tax reform will lead to a situation of stock out on closing dates which cannot be the
intention of Govt. Gifts, free samples also taxable under GST: The concepts of
manufacturing, sales are no more relevant under GST regime because we are moving to a
more comprehensive taxable event which is supply as defined under section 3 of model GST
law. If we touch upon the definition of supply it says supply includes all forms of supply
made or agreed to made for consideration in the course or furtherance of business and also
includes certain transaction as supply even without consideration as per schedule I. Now
clause 5 of schedule I says supply of goods and / or services by a taxable person to another
taxable or non taxable person in the course or furtherance of business even without
consideration is taxable under GST. So under GST regime if you are giving a gift to one of
your customer you will be liable to pay GST on it which is not there under current VAT
laws. These kinds of transactions of gifts, buy one get one free are very common under retail
sector and will impact business or sales promotion policies significantly. Valuation
challenges for retail sector under GST: The value of supply of a goods and services under

22
GST shall be transaction value provided the supplier and recipient are not related parties and
price is the sole consideration for supply. So in case of gifts, free samples, buy one get one
free value shall be determined by following valuation rules given separately. The value on
which is tax is paid by following valuation rules may also be rejected by assessing authority
if they have reason to doubt the truth or accuracy of value. Blockage of working capital in
case of stock transfer: Gone are the days when stock was transferred between the offices of
same entity on strength of F forms under CST law. This was a great planning tool for many
companies to avoid CST cost in case goods are procured from other states. Now under the
GST regime interstate movement of goods will attract IGST and even in case of same entity
also hence it will cause significant blockage of working capital. The branch which is
transferring goods to another branch of same entity has to upfront pay the tax but the receiver
can book the credit and use this tax to pay his output GST liability in times to come. Critical
issues in trade incentive and discounts: Trade incentives and discounts that are allowed after
the supply of goods have been effected shall become part of transaction value on which tax is
paid by the supplier of goods. The incentives such as yearend sale discount, festival sales,
turnover discount etc. are normally given after supply and cannot be linked to specific
invoices will now become part of transaction value and tax has to be paid. This is a serious
matter of representation for the retail industry before the law gets its final shape. Tax rates
will play critical role for industry: A lot of discussion is going on today about rate of tax
under GST regime. If go through the revenue neutral report (RNR) as discussed above there
will be 5 categories of rate for goods under GST. Have you visualized the impact of GST
rates on certain commodities where total incidence of indirect tax is 6%-8% presently and
this includes excise duty and VAT/CST? Here I am talking about few commodities such as
edible oil, papad industry where rates will shoot-up even if it is kept in lower slab of 12%. In
my view if the rates are not kept at existing level industry will be adversely impacted.
Whether prices of commodities will really come down after GST? In this part of my
article a comparison is made for understanding the impact of GST on prices of goods which
are presently taxable @ 27% under existing excise and VAT.

23
CHAPTER NO 4: DATA ANALYSIS, INTERPRETATION AND
PRESENTATION
1. Lower Taxes
GST effectively replaces all the various indirect taxes being applied to the
supply of retail products. Before GST, retailers had to pay multiple taxes,
including VAT, CST, Services tax, excies duty, etc, amounting to around 30% of
the product cost. After GST, there is only a single tax, varying from 12 to 28% on
different products. GST also reduces the cascading of taxes as the credit for input
taxes can be now claimed by retailers.
2. Availability 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.

24
This is again one of the big advantages for the retail sector where certain taxes
charged on supply of services say on rent payment for outlets, huge professional
charges paid for various services like recruitment agency etc. will now available as
credit under GST. The duty payment made at the time of import (CVD+SAD) of
goods will be available as tax credit under GST which was earlier a cost for the
sector although refund of SAD was available subject to various restrictions and
various checks and balances. In my view this enhanced availability of credits
brings a very positive impact for the sector.
3. Reduced Complications
The less number of taxes means less complexity. Also, GST is a
completely digital tax system, that means retailers can plan and file the returns
online without having to manage a lot of physical documents, accounts, etc. The
entire compliance system under GST will be taken care by GSTN (Goods and
services tax network) which is a IT network for managing all the process related to
registration, returns, payment etc. This network is one of the largest in our history
which will be processing 3 billion vouchers per month with 50000 transactions per
second.
As per the process note on GST returns invoice level information will not
be required to be given for a company where supplies are made to customers i.e.
B2C supplies but HSN codes will be mandatory for invoice purposes. For taxable
persons up to the turnover of 1.50 cr. HSN codes are not required but in case
turnover exceeds 1.50 cr. but up to 5 cr. HSN codes of 2 digits and turnover above
5 cr. HSN codes of 4 digits will be mentioned in invoices.
4. New Promotional Strategies

The new GST tax regime has forced retailers to re-plan and implement a
completely new promotional strategy in sharp contrast to the erstwhile strategy of
promotional gifts and items. This is primarily because under GST all supply
channels are accountable and accordingly attract some tax. In the new GST model,
any supply without consideration will attract tax and therefore, everything will

25
have to be accounted for. Retailers gave out gifts and promotional items with
products as a part of their overall marketing strategy which till now used to be tax-
free. However, when GST gets implemented, no such rule will be applicable and
retails will have to pay taxed on gifts and promotional items therefore, letting them
to re-think their promotional strategies.
5. Ideal For Start-ups

The Government has already announced tax rebates for entrepreneurs and
startups. With GST getting rid of the complications associated with the retail
sector, it is inevitable that budding startups would tap into this opportunity.
A business currently has to get VAT registration from the State’s Sales Tax
Department. With GST in picture, the procedure for GST registration will be
centralized and unvarying. Multiple VAT registrations across states will not be a
prerequisite, one GST registration pan India will suffice.
b. Currently, VAT registration and VAT payment is compulsory in India once a
business crosses yearly earnings of Rs.5 lakhs in some states and Rs.10 lakhs in a
few other. After GST, businesses with revenue of less than Rs 10 lakhs per annum
will not have to index for GST nor collect GST again.
c. Today, tech giants ‘stock transfer’ goods from one state to another since they
have logistics and infrastructure capabilities thus, escaping paying taxes on inter-
state transfers and movement. Due to limited resources and infrastructure, SMEs
and startups aren’t able to do this and they get goods through inter-state sales
consequently having to shell Central sales tax. GST will bring parity between
small players and big corporate houses and since it diminishes multiplicity of
taxes, compliance costs should also plunge along with logistic inefficiencies, slow
transit times, red tape and disruption in business climate.
6. Phasing out of CST will brings efficiency in supply chain

In the present system of taxation every company in the retail sector plans
locations of its warehouses and branches in order to avoid cost of CST. Suppose if
a retailer is located in Delhi and it procures material from a manufacturer in

26
Maharashtra then normally they prefer the route of stock transfer against f form to
avoid CST although loss of retention is borne overall. Once GST is implemented
all interstate supply of goods shall be subject to IGST which is a creditable tax.
This availability of credit will give options to the sector to shut some of the
locations which were just used to transfer goods from depot to outlets. Under
proposed GST regime transfer of goods will be more simple with availability of
tax credit completely.
7. Place of supply in case of retail sector
GST is a destination based consumption tax where tax goes to the state
where goods or services are actually consumed. Therefore it becomes important to
determine the correct place of supply for making payment of tax. On careful
reading of model GST law it is clearly written that POS in case of retail sector
(B2C) shall be the location of goods at the time of delivery to the recipient i.e.
location of store. This whole analysis reveals that in case of B2C transaction in
retail sector CGST+SGST shall be charged.
This principal is not diluted even in case home delivery is made by a
retailer in his local limits. The POS in this case will be the location of the goods at
the time at which the movement of goods terminates for delivery to the recipient
i.e. again intrastate.
Overall we can say that under proposed GST regime place of supply for retail
sector shall be the location where goods are delivered to the customer.
8. Growth of retail market

GST will lead to the unification of markets as it will streamline the state
and the central taxes and eliminate confusion of taxation in different markets.
Retailers can easily expand their business beyond boundaries as they have to
register their business only once and then can carry operations across all states.
This will also contribute toward the growth of the retail market and help boost the
economy of the country.

27
Retailer are come under the category to furnishing of returns under section 39 are
GSTR-3B, GSTR-4. GSTR-3B is a monthly return are also known as simple return. GSTR4 is a
composite return filling of quarterly return in the period of 18th of the month succeeding quarter.
Retailer are pay the tax behalf of the consumer. Retailer or all business people is have threshold
limit for registration his aggregate turnover exceeds Rs. 20 lakhs in a financial year. Before GST
they follow much more tax operation are maintained by all the business person after the all
operation are reduced and easy to do they business in the implementation of GST. In before
many of the people are not involve in the tax now all the people are involve in the tax the main
supply chain are the retailer to collect the tax form the customers. GST are reduce tax such
product are fan, air cooler, light, water heater, computer, monitor, printer, FMCG products,
cloths, within Rs.500 of footwear are reduce tax of 5% and more than Rs.500 of footwear are
increase tax 18%. In the main reason for reducing tax before manufacturing tax are pay 24% -
26% of tax now GST introduce 18% of tax then the price will reduced. So the cost of the product
also reduced. At the same time service tax are increased such as Use of Restaurant, Air
condition, TV, vacuum cleaner refrigerator, washing machine, internet jewelry, train, flight, TV
service, Wi-Fi, cable TV service, car, perfume, hair die, shaving cream, school fee, insurance are
increased 15% to 18% of GST tax for the reason who are able to afford tax payer.
Further, even after one year of GST go-live, there is deferment of implementation of provisions

28
relating to advances and purchases from unregistered vendors, Tax Collection at Source for e-
Commerce players and Tax Deducted at Source for works contractors which leads to an
atmosphere of ambiguity for existing businesses as well as those looking to set up new ventures.
One of the focus areas for India Inc is the matching concept, wherein a buyer is required to
reconcile its tax payments with the tax collections, deposited and reported by the supplier on the
Government portal. Any incorrect or unmatched transaction would lead to denial of credit to the
buyer. However, due to IT glitches, this concept was not implementable and the system is
deferred till necessary technological framework is put in place by the Government. Given that
employer and employees are defined as related parties under the GST law and supplies to related
parties even without consideration is now a taxable supply, all transactions between employers-
employee need to be analyzed qua the said provision. Supplies from employee to employer of
Gifts upto INR 50,000 per employee are exempted from GST. Free benefits such as free food,
health check-up, gym, crèche etc. are common facilities provided to all employees and benefits
that form part of employment policy should be akin to standardized consideration to the
employee in course of employment and thus, should not be liable to GST. However, wherein
there are supplies for which part or full value recovered from employees (such as subsidized
food), the same to be considered as supply and valued at the open market value. Kerala AAR in
a recent advance ruling 2, held recovery of canteen food expenses as taxable supplies Tax payers
also under various contracts have clauses pertaining to liquidated damages from their vendors
i.e. contractors etc. for delay in delivery, performance issues, etc. Such damages may also get
adjusted from the invoice, thus resulting in net billing/payment. Taxability of liquidated
damages/ cancellation charges have been matter of litigation even under the erstwhile indirect
tax regime. Given the wide coverage of the definition of services, the ambiguity on their
taxability continues even under the GST regime. While there as ruling of the AAR3 which holds
that such Liquidated damages are taxable as a declared supply in the hands of the contractee
under the provision Schedule II (5)(e), such ruling is likely to be contested at an appellate stage.
Implementation of the anti-profiteering provisions is one of the key areas of debate within the
industry players. While the regulations seek to prevent entities from making profits on account
of GST, an overarching antiprofiteering provision under the GST law without clear guidance or
explicit rules has led to considerable ambiguity, primarily on account of the following:
a) Lack of clarity on the granularity of anti-profiteering analyses i.e. at aggregate company

29
level, product category or SKU level, impact qua price controlled products
b) Can the Indian tax payers resort to mechanism followed by tax payers in other jurisdictions
with similar anti-profiteering provisions (such as Australia/ Malaysia?). Will the tax authorities
accept the same?
c) Whether transition costs incurred by the Company on account of GST implementation may be
absorbed while computing a revised anti-profiteering compliance price.
d) On which date such price reductions were/ are to be made effective. Recently, the National
Anti-Profiteering Authority (NAPA) has issued two orders – one for a company dealing in
automobiles4 and another for one engaged in rice business5. In both these cases, the authority
ruled in the favour of the companies. However, it is not clear as to exactly how the revised price
computations were carried out by the companies and factors differ basis the nature of the product
and business.
Rate rationalization :-
The biggest challenge since the GST implementation for the FMCG and retail sector has
been the effective rate of tax. While GST was expected to simplify taxation and bring
uniformity, the different tax rate slabs and higher rates for consumer durables led to an increase
in the cost of some items of mass consumption. Given the same, the GST council has been
working on rationalization of rates. In a recent GST council meeting6 broad rate reductions were
introduced with a specific focus on products such as sanitary napkins, domestic electrical
appliances/ white goods (food grinders, mixers, shavers, hair dryers etc.). Businesses
continuously need to analyze the impact of the rate rationalization, especially from an anti-
profiteering perspective.
Classification related issues (medicaments vs. cosmetics) –

The classification of certain cosmetics such as skin care preparations which also have
medicinal properties and contain recognized medical ingredients has been historically subject to
litigation since medicaments or ayurvedic items are taxed at a lower rate, whereas cosmetics are
typically taxed at a higher rate. The test for determining whether a preparation can be classified
as a medicament or not depends upon whether it is meant primarily for use in treatment of skin
disorders or diseases and whether the ingredients therein have known or recognised therapeutic
30
value or not. While there is an advance ruling7 on this issue that discusses some of the
jurisprudence under the previous regime, and sets out some principles on how preparations can
be classified as medicaments, a clarification in this regard with more concrete parameters could
go a long way in ensuring consistent treatment and minimal disputes. However, there is
difficulty in providing absolute guidance as the products are themselves unique in nature.
Marketing/ discount schemes :-

While all business have to offer different types of marketing schemes and offers, in the
FMCG and retail the industry is structured in a way that the manufacturers/ importers offer a
variety of pre and post-sale discounts and incentives, free samples etc. to dealers/ distributors.
While the industry players, during implementation of GST have taken positions relating to
different types of marketing schemes, a conclusive clarification on the same is still not available.
Further, in some States, officers at the ground level have also commenced raising queries
relating to the practices adopted. Key issues pertaining to the same are as follows:
 Tax treatment of different types of schemes – There are diverse range of schemes offered by
FMCG and retail players to its distribution network, and due to the ecosystem these keep
evolving. Various categories of such transactions are as follows: -
- Post sale discounts such as price discount, purchase based schemes, category growth, trade
discount, turnover target discounts
- Special discounts such as festival price discount, liquidation support and other seasonal
rebates
- Merchandiser support, visibility allowance and security deposits received from exclusive
outlets - Corporate or bulk buy discounts
- Other allowances such as loading/ unloading allowance, freight allowance and event support
The aforesaid schemes can either be cash discount or it could also be additional quantity
supply. It also requires factual examination whether the secondary market schemes qualify as
post sale discounts eligible for deduction under section 15(3)(b) or be considered as a ‘subsidy
directly linked to price’ under Section 15(2)(e) of the CGST Act. If it qualifies as ‘subsidy
directly linked to price’, it would attract GST in the hands of recipient. It is essential to ascertain
the tax treatment, ITC impact of different types of schemes, as well as maintain appropriate

31
documentation so that the entire value chain adopts appropriate tax practices.
 Promotional schemes, off take discounts –

Company issues promotional schemes and provides off take discounts to stockist/ retailer
wherein on buying some specified quantity of a product, the distributors will get additional
quantity of that product free of cost (e.g.. buy 10 items with additional 2 items free). Further, the
chargeable as well as free supplies are mentioned on the face of the same invoice (e.g. it is
mentioned 10 units chargeable and 2 units free). Basis the above, the issue under consideration is
whether input tax credit is required to be reversed on the goods supplied based on commercial
terms without consideration under the said transaction. One view on this issue is that the free
goods supplied are not in the nature of ‘gifts’ but are akin to a quantity discount and thus, no
input credit reversal should be required for the same. However, this view has to be formally
confirmed by the GST authorities.
 Free samples given to potential customers/ Gifts to dealers/

distributors –
Company distributes its products as a part of marketing initiatives, etc. as free samples or
gifts to dealers/ distributors for reaching targets such as gold coins etc. As per Section 17(5)(g),
input tax credit shall not available for goods supplied as free samples. While currently, credit
reversal is required, industry is representing that credit reversal should not be required as
distribution of the said goods as free samples is required for promotion of the sale of these goods
and are thus used in course and furtherance of business. Further, while generating e-way bill for
the same, industry should seek clarification regarding the taxable value to be reported on the e-
way bill for such FOC supplies. Procedure/ mechanism for computation of credit reversal on
account of goods distributed as free samples, used for personal use etc. is not clear in the law.
Further, no specific provision is there in the CGST Act for requirement to reverse credit in case
of free of cost services (such as free trips to customers on achieving certain targets, etc.).
Combo packs -
32
There are various marketing campaigns operative in this sector to increase customer
engagement and combo packs (combinations of different types of products) is a regular
phenomenon. For combo packs where price breakup is also shown on the invoice, an issue may
arise as to whether the same can be treated as mixed supply (and therefore taxable at highest rate
applicable to the individual items) or individual supply (taxable at tax rates applicable to
respective individual products). Given the statutory norm, mere mention of the price breakup on
the invoice may not always change the characterization of a mixed supply to an individual
supply. However, there is no clarification on the practical constituents of qualifying as a mixed
supply and the issue needs to ideally be analyzed based on facts of each situation.
Loyalty points redemption-

Various retailers run different kinds of loyalty schemes where customers accumulate
points and subsequently, on purchase of goods, can make full or part payment through the
accumulated points. At present, there is some lack of clarity on the treatment of these points.
While some treat it as a discount, some choose to pay GST on the entire value of the goods
(including the equivalent of points). The question is whether GST should be paid on the amount
after reducing the sum attributable to loyalty points, as it is essentially in the nature of quantity
or off-take discount offered to frequent customers (provided the other prescribed conditions are
met). Further, given the extensive supply chain in this industry, the loyalty point redemption
transaction through the supply chain also needs to be evaluated to ensure appropriate tax
treatment at each leg of the transaction.
Vouchers -
The payment modes are constantly evolving and new ways of making payments are being
added. In this industry some of the most commonly used payment modes are pre-paid cash
cards/ gift cards, meals / goods vouchers and gift vouchers. The holder of such cards/ vouchers
are generally entitled to a discount or equivalent monetary value for purchase of goods/ services.
‘Voucher’, for the purposes of GST, necessarily means that instrument which should be accepted
as consideration (wholly or partly) for a supply. Therefore, a voucher is an asset for the
recipient, and without a recipient, a ‘voucher’ would lose its meaning. Further, there is a specific
time of supply in case of vouchers i.e. in case of supply of vouchers by a supplier, the time of
33
supply shall be—
(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases. Further, the rate of tax for vouchers is
the rate applicable to goods or services they are issued in respect of or that applicable at the time
of redemption. Given the specific provisions relating to vouchers, while the general view is that
GST is to be paid at the time of redemption of voucher in case of purchases by customers, it is
imperative to evaluate each type of transaction to ensure that the appropriate point of taxation is
adopted. 7. Sales returns, customer refunds and other miscellaneous transactions
 Excess collection of money from customers - In case of excess collection of money from
customers on account of rounding off difference, the issue is as to whether GST to be paid on
additional amount recovered. There is no specific relaxation in GST law as regards non-payment
of GST on excess amount or net amount collected from customer due to rounding-off difference.
 Sales return from a different State - In case of inter-State supply, where goods are returned by
customer in a State different from where the goods were issued (say from Delhi), whether credit
note (and subsequent tax adjustment) can be claimed by the State which originally invoiced the
good (in the absence of receipt back of goods to such State).
 Sales return in case of closure of branch/ warehouse in a State - Similarly, where the customer
returns goods in different State due to closure of the office/ warehouse of the State from where
the invoice was issued (say in Delhi) , whether there would be credit blockage in the State of
Delhi on account of making a non-taxable supply from Delhi (in so much so that Delhi would
not make any taxable supply of goods in future once returned by the dealer since the goods
would be lying at different State).
 Refund provided to customers – In certain cases, if the customer is unhappy with the product
or in case of an expired/ faulty product, refund is provided to the customers. The issue to be
considered is whether the same may be construed as a separate supply liable to GST. In this
case, a position is possible that there is no underlying supply of goods in the course of
furtherance of business by the customer is such a scenario and thus, this should not qualify as a
separate supply.
 Compliance requirements for credit note/ debit notes - Given the quantum of low value high
volume of transactions, the requirement for raising one credit note/ debit note per invoice was
creating a compliance and administrative nightmare for the industry. Given the same, in order to

34
simplify the compliances, an amendment to the law is issued allowing for issuance of a
consolidated debit note/ credit note covering multiple invoices.
Return of expired goods –

Section 142 of the Central Goods and Service Tax Act, 2017 (CGST Act) prescribes that if
goods are returned by a registered person on which duty was paid not prior to 1 January 2017,
such returns will be treated as a supply. Separately, where goods are written off or destroyed,
input tax credit of such goods will not be available as per Section 17(5)(g) of the CGST Act. In
this regard, as per the letter issued by the GST authorities on return of expired stock8, it has been
clarified that ITC taken on expired / damaged go should be reversed basis the aforementioned
provision. Further, on return of goods, a deduction of GST paid cannot usually be claimed since
the return occurs after September of the following financial year. The aforementioned
clarifications leads to the following issues:
 Company is burdened with double tax cost on account of input credit reversal and no
deduction of tax paid
 It leads to a confusion as to whether the tax credit to be reversed is that of the tax amount to be
charged by the returning person or that of the inputs that were consumed in the manufacture of
the expired goods.
 The ultimate manufacturer of the expired goods, who paid the tax to the Government at the
time of the original sale / supply, should not be required to reverse any ITC, at the destruction of
the expired goods, as the goods were already tax paid.
Given that the supply chain is extensive and often involves multiple stockists/ sub-stockist,
maintaining a paper trail in case of sales return (especially of expired stock) may become effort
intensive. Further, in case the goods are sold by sub-stockists to each other (especially across
States), there is no way of identifying the original invoices.
Input Service Distributor vs. Cross Charge –

35
Under GST, supplies between State registrations of an entity are subject to tax, even if the
same is without consideration. In view of this, companies are required to undertake analysis of
activities undertaken by Head office for its branches and vice versa; identify the value of such
services and discharge tax liability thereon or distribute it in by obtaining an Input Service
Distributor registration. The said exercise involves huge effort and time. Further, it leads to
complexities and additional GST compliances.
Area based exemptions/ Benefits under State Industrial policy –

In pre-GST regime, industry used to enjoy fiscal benefits in the North Eastern region,
Himachal Pradesh, Uttarakhand and J&K in the form of excise duty exemptions/ refunds. Now
under GST, those refund benefits have been withdrawn and are proposed to be
compensated/refunded as budgetary support. The current proposal restricts refunds to the extent
of prescribed percentage of CGST / IGST payout in cash (i.e. after adjusting all input credits) for
units in the fiscal benefit zones for area based exemptions whereas percentage of SGST benefit
for State Industrial policy. This may result in substantial reduction of GST refunds as compared
to the present benefits granted and may make certain units unviable. Further, it is to be
highlighted that the proposed refund model seems to restrict the eligibility of refund to only
actual manufacturers, thereby not addressing concerns related to principal manufacturers who
operates through business models such as third party manufacturer (3Ps) and job working
arrangements, mainly in Himachal & Uttarakhand. Thus, the quantum impact of such change in
the benefit schemes should be carefully evaluated to enable that the principle of promissory
estoppel is not deviated from. Also, if the flow of benefits stand altered (eg. Benefit earned per
year in absolute terms remains constant), the question whether this be factored as a cost increase
for anti-profiteering purposes needs to be debated. Further, some industry players have filed writ
petitions against this reduction in the quantum of benefits, which are currently pending.

36
1. Proposed GST Rate Is Higher Than VAT

Proposed GST Rate Is Higher Than VAT The rate of GST is proposed to
be higher than the current VAT rate in India, which although reducing the price
in the longer run, will be of no help in cutting down prices of commodities.
2. Dual Control
A business will be indirectly controlled by both the centre and the State in
all tax related matters. The State will lose autonomy to change the tax rate which
will be regulated by the GST Council.
3. Loss Incurred By the Manufacturing States

GST is mostly related to the manufacturing segment, most manufacturing
states may incur losses. But the government has proposed to compensate for those
losses for a period of 5 years.
4. Transitional challenges for retail sector:

The model GST law contains a detailed chapter on transitional provisions
wherein many transitional possibilities have been covered as per the wisdom of
lawmakers. Migration of registration from existing law to new law, carry forward
of tax credits shown in returns, refunds pending in previous law etc. As per our
understanding following critical issues have not been addressed while drafting
transitional provisions:
1. If supplier has removed goods on 30th day of March 2017 or 31st March which
is received by customer on say 01st day of April 2016 or later on. What will be
37
the status of tax credit in this specific case ? This has not been discussed
anywhere in model GST law. This is a matter of representation for industry and
needs serious consideration at the time of finalization of law.
2. On careful reading of provisions given in model law credits which are part of
return shall be taken into GST regime. The portion of excise duty which is
embedded in closing stock of retailer at their outlets, depots will suffer higher
tax again when these goods will be sold into GST regime. Serious
representations should be made in this regard by industry to ministry otherwise
such a big tax reform will lead to a situation of stock out on closing dates
which cannot be the intention of Govt.
5. Gifts, free samples also taxable under GST:

The concepts of manufacturing, sales are no more relevant under GST
regime because we are moving to a more comprehensive taxable event which is
supply as defined under section 3 of model GST law. If we touch upon the
definition of supply it says supply includes all forms of supply made or agreed to
made for consideration in the course or furtherance of business and also includes
certain transaction as supply even without consideration as per schedule I.
Now clause 5 of schedule I says supply of goods and / or services by a

taxable person to another taxable or non taxable person in the course or furtherance
of business even without consideration is taxable under GST.
So under GST regime if you are giving a gift to one of your customer you
will be liable to pay GST on it which is not there under current VAT laws. These
kinds of transactions of gifts, buy one get one free are very common under retail
sector and will impact business or sales promotion policies significantly.
6. Valuation challenges for retail sector under GST:

The value of supply of a goods and services under GST shall be transaction
value provided the supplier and recipient are not related parties and price is the
sole consideration for supply. So in case of gifts, free samples, buy one get one
free value shall be determined by following valuation rules given separately.
38
The value on which is tax is paid by following valuation rules may also be rejected
by assessing authority if they have reason to doubt the truth or accuracy of value.
Blockage of working capital in case of stock transfer:
Gone are the days when stock was transferred between the offices of same
entity on strength of F forms under CST law. This was a great planning tool for
many companies to avoid CST cost in case goods are procured from other states.
Now under the GST regime interstate movement of goods will attract IGST and
even in case of same entity also hence it will cause significant blockage of working
capital.
The branch which is transferring goods to another branch of same entity
has to upfront pay the tax but the receiver can book the credit and use this tax to
pay his output GST liability in times to come.
7. Critical issues in trade incentive and discounts

Trade incentives and discounts that are allowed after the supply of goods
have been effected shall become part of transaction value on which tax is paid by
the supplier of goods. The incentives such as yearend sale discount, festival sales,
turnover discount etc. are normally given after supply and cannot be linked to
specific invoices will now become part of transaction value and tax has to be paid.
This is a serious matter of representation for the retail industry before the law gets
its final shape.
8. Tax rates will play critical role for industry

A lot of discussion is going on today about rate of tax under GST regime. If
go through the revenue neutral report (RNR) as discussed above there will be 5
categories of rate for goods under GST. Have you visualized the impact of GST
rates on certain commodities where total incidence of indirect tax is 6%-8%
presently and this includes excise duty and VAT/CST? Here I am talking about
few commodities such as edible oil, papad industry where rates will shoot-up even
if it is kept in lower slab of 12%. In my view if the rates are not kept at existing
level industry will be adversely impacted.

39
9. Matters of serious consideration for retail sector:
This part of my article will discuss some of the serious issues in model
GST law which needs immediate attention of authorities in a summary manner:
1. Gift and promotional offers: Looking at the international practices in Europe
and other countries gift, free samples should not be included in the definition
of supply to avoid business promotion strategy of taxable persons. If this is not
possible exemption must be granted up to a certain limit say 20000 or so and
this is internationally followed in some of the countries.
2. Credit of CST and excise on closing stock: Stock lying on the date of
transition will contain portion of excise duty which is a cost for the entire retail
sector. When the same stock will be sold in GST regime the output tax will be
higher which will become cost for the industry. If amicable solution is not
given it may lead to a stock out situation which is not expected from such a big
reform. Industry must make an attempt to convince Govt. to allow at least a
deemed credit on account of excise and CST.
3. Incentives and discount post supply: As envisaged under GST discount will
become part of transaction value unless it is linked with the relevant invoices.
In case of yearend target discounts it cannot be linked with the invoices hence
this provision should be relooked and a suitable solution must be provided for
the same.
4. Free flow of goods across the nation: GST is designed with the theme of free
flow of goods across the nation without any kind of barriers such as check post
etc. to check the documents accompanied with goods vehicle. If we go through
the model GST law certain documents may be prescribed by Govt. if value of
consignment exceeds Rs. 50000. Such kinds of provisions should not be there
in GST to avoid corruption and other consequences.
5. Matching of inward and outward supply: On the basis of process note
released by Govt. on GST return a matching will be carried out by GSTN on
the next day of filing GST return in form GSTR-3. In case of retail industry
especially FMCG sector the number of suppliers will be many more and

40
tracking of mismatch on pan India basis will become herculean task. In our
opinion such kinds of draconian provisions should not become part of law in
times to come.

41
C. Product Wise Implementation Of GST On Retail
Sector In India
After introduction of GST in India, the availability of real estate in terms of

location and sizes has been a challenge for retailers as it is understood that lease
rentals in marquee areas in stores command a high premium price and have
adversely impacted the retailers’ prevailing thin margins and break even is
affected. In broader sense, poorly developed infrastructure in the domain of supply
chain management, warehousing and electrical and electronic equipments in small
cities is a big hurdler for retailers ought to tackle the issues. The below table
presents the impact of GST on various product categories depicting the rise in
prices and decrease in prices and presents the products which are tax free.
1. IMPACT OF GST ON RETAILERS ON PRODUCT

CATEGORIES
The below table provide details of the impact on retailers on the basis of
product categories. The product description includes food, personal care, travel and
auto, hotels, others, entertainment and household.
SR. PRODUCT GONE PRODUCTS GONE

DESCRIPTION
NO CHEAPER COSTLIER
Products such as
unpacked food
Tea and coffee, food at
grains, unbranded
fine dining restaurants
1 Food Atta, Maida, Besan,
or those inside fivestar
vegetables, salt,
hotels.
sauces, food at small
restaurants
Soaps, Hair oil, Shampoos and
2 Personal Care
toothpaste Deodorants
3 Travel and Auto Airfares for economy Airfare for business

42
class travel, class and train tickets,
bikes/two-wheelers bikes which have an
with engine capacity engine capacity of over
below 350cc and 350 cc.
Sports Utility
Vehicle
(SUV’s)
Rooms at non-luxury
Hotels which have
hotels and hotels with
4 Hotels room tariffs over Rs
tariffs of less than Rs
7,500
7,500.
Aerated drinks,
tobacco and luxury
Apparels and Foot
5 Others goods, Mobile bills,
ware
salon services and
buying a flat
Movie tickets above Rs
6 Entertainment
100.
TVs, refrigerators, ACs,
7 Household
washing machine.
(Source: http://www.financialexpress.com/industry/gst-impact-and-effect-on-
al-items)
The effect of GST implication on various product categories are been shown
in the above table which is indicating the tax imposed on them, however, there are
also certain product categories which doesn’t imposed any taxes on GST as per
Government of India norms. The product which doesn’t imposed any taxes are
been explained further.

43
2. IMPACT OF GST (TAX FREE PRODUCTS)
The below table provide details of the impact on retailers on the basis of
product categories which are tax free as per government norms. The product
description includes daily products, women accessories, hotel, services,
miscellaneous and others. It has been explained further:
SR.
DESCRIPTION TAX FREE PRODUCTS/ ITEMS
NO
Products include salt,egg,milk,butter milk,
unpackaged curd, natural honey, fresh fruits,
1 Daily Products vegetables, besan, bread, lassi, unpackaged panner,
fresh meat, fish, unbranded and unpackaged tea,
coffee
Women Bindi, Sindoor, Bangles, Kajal (other than pencil
2
Accessories sticks kajal)
3 Hotel Hotel Room Tariff below Rs.1000
4 Services Education and Healthcare
5 Miscellaneous Stamps, Judicial papers, Printed books, Newspapers
6 Others Indian National Flag, Pooja items, Contraceptives

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D. HOW SIGNIFICANT WILL BE THE IMPACT OF GST
ON RETAIL SECTOR IN INDIA?
Goods and Services Act (GST) is considered to be a game changer for the
Indian economy. This has been the biggest indirect tax reform which was long
awaited and certainly promises to create unilateral platform for all goods and
services offered in India. No doubt, there have been apprehensions regarding the
impact of GST on various sectors of Indian economy. The case of retail sector is of
paramount significance as it not only includes huge volume of transaction but also
generates mass employment in both urban and rural sector. As far as the global
scenario is concerned, India is the fifth largest preferred retail destination and one
of the highest in terms of per capita retail store availability. Whether the
exponential growth of retail sector will carry forward in the GST era, is an
important discussion across several quarters. Nevertheless, Compound Annual
Growth Rate (CAGR) of India is dependent on the vibrant retail sector.
a. The proposed GST will reduce taxes with more transparency– In the VAT
regime, retail products were subject to VAT, CST, and service tax on
warehousing. Apart form that, the products were also subject to Octroi or
entry taxes along with consulting fees and rent. GST system will drastically
reduce taxes and this will reduce the price of the product bringing much
needed relief to the customers or consumers.
b. Increase in supply efficiency will be an added advantage in the GST era–
Supply efficiency is another highlight which is going to transform the
traditional retail chain set up. CST being abolished and no further need of
keeping warehouses, increase in efficiency will certainly be an added
advantage to this sector.
c. Consistent input tax credit will be a common feature with the arrival of
GST– This will no doubt eliminate the cascading effect of taxes in the retail
industry.
d. Location & compliance factor will no longer be an issue after GST
implementation– Location wise, in the GST era, place of supply for retail
will be the location where goods are delivered in a stipulated time frame.
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Importantly enough, the role of the entire compliance system under GST will
reply on Goods and Services Tax Network (GSTN) which will be managing
all issues regarding registration, returns, payments and the other aspects of the
whole procedure. Smooth functioning of GSTN will be indeed pivotal to the
profit making aspect of retail sector in the GST era.
e. Taxation on gifts, promo offers and other promotional items will begin in
the GST era– In Indian retail sector promotional offers or discounts are very
common, especially in the festival season. In the VAT regime, all such free
products, samples, gifts were tax-free and retailers opted for such as essential
tool in aggressive campaigning. In the GST regime, all such gifts will be
considered for tax. Thus retailers will definitely need to brainstorm on
alternative way outs in GST era.
f. Competing with the e-commerce domain will be an important factor even
in the GST era for the retail sector– For the last few years e-commerce
domain has been considered to be the biggest opponent of retail sector. In the
GST era, all such companies will be required to consider their operations
across which will require huge logistical support with improved infrastructure.
No doubt, it will definitely favour the case of the retailers.
g. Will GST invite more FDI in retail sector? Whether GST will invite
Foreign Direct Investment (FDI) in retail industry or not, is another serious
issue. In all probability, investors will be careful enough at least for the first
few months of GST era and then further investments can certainly happen.
h. Probable expansion of retail sector in the GST era will be a huge boon in
the long run– Considerable advantages in both taxation and operating domain
will give ample opportunities along with cost saving approach. Added to that
widening of potentials market for retailers will boost the market with more
money flow and vast new range of possibilities in the days to come.
Nevertheless, the timing of implementing GST is also in favour of the
retailers. Last year when the Central Government opted for sudden
demonetization, wholesalers, distributors and retailers had no other choice but to
de-stock the inventory and also they were compelled to reduce the volume of

46
goods considerably. At present Indian economy is recovering its shape in spite of
average yearly results and retail sector too has showcased its promise ahead of the
GST regime. An unified potential retailer market will definitely beneficial for
Indian economy in the long run and in all probability, the arrival of GST will help
it.

47
E. SURVEY, QUESTIONNAIRE AND ANALYSIS OF
DATA
The primary information from the individual was collected through the
questionnaire which was circulated to the individual from online mode which
helped to generate data regarding my topic ‘IMPACT OF GST ON RETAIL
SECTOR’. The questionnaire was designed to understand personal prospects of the
individual such as age, gender, occupation, knowledge of derivative market,
income range, etc. The respondents were selected by adopting random sampling
technique, were 30 responses has been received to the questionnaire. The same
were analyzed as below, so as to arrive at the result of the questionnaire. The
results to the questions asked have been analyzed below:
1. Gender
33%
Female Male
67%
As can be seen from the chart, out of the total 30 responses received for the
questionnaire, 33% of the sample population was Male respondent and 67% of the
sample population was Female respondent.

48
2. Age
3% 3%
Below 20 years
20 – 30 years
30 – 40 years
Above 40 year
94%
As we can see from the above Pie Chart, there is a large population of
respondents falling in the Age group of 20 -30 years for 94%, followed by
respondents falling in the Age group of below 20 years and Age group of 30 – 40
years for 3%. But above 40 year noon has been responded.
3. Please select your education level.

3%
Under Graduate
43% Graduate Post Graduate Other
54%
As can be seen from the above Pie Chart, the large number of respondents
are graduate with 54%, 43% of respondents are Post Graduate, 3% of respondents
are Under Graduate and No responses has been received in other field. Thus we
can observe from the data that large number of respondents appear to be Graduate.

49
4. Kindly state if you are aware about the impact of GST in Ind
23%
Yes No
77%
As per the above pie chart, from the 30 respondent only 23% of the
respondent are not aware about the impact of GST in Indian retail sector. 77% of
the respondents are aware about the impact of GST in Indian retail sector.
5. Since how many years you are

working in retail sector?
3%7% 7%
Below 1 year
1 - 3 years
4 - 6 years
Above 6 years
83%
As we can see from the above chart, the survey regarding the respondent
working year in retail sector. 83% of the respondent falls in below 1 year working
in retail sector. 7% of the respondent falls in above 6 years and 4 – 6 year. 1 – 3
year working year has been selected by 3% of the respondent.

50
6. Do you think the presence of GST in Indian retail sector is be
17%
Yes No
83%
These charts present the detail regarding the benefit of the GST in Indian
retail sector. 83% of the respondent fined the presence of GST beneficial. 17%
of the respondent reverted unbeneficial to the GST presence.
7. Does GST provide Tax Saving

Benefit to your sector?
17%
Yes
No
83%
As we can see from the above pie chart, 83% of the respondent reverted
that GST provided Tax saving benefit in India and 17% of the respondent
reverted no for the GST tax benefit.

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8. Do you believe current tax system used
by Indian Retails sector is sufficient or there is a need fo
27% Yes
No
Not Sure
60% 13%
From the above pie chart, 60% of the respondents are no sure above the
current tax system are sufficient or not. 27% respondent reverted toward the
sufficient towards tax system and 13% respondent has reverted towards the
improvement of the tax system.
9. Choose one of the following challenges

that according to you is the biggest challenge you are fac
Lack of Awareness and

13%
concern
47% Lack of Technology and abilities
17% Lack of coordination and alignment
23%
As per the above pie chart, 47% of the respondent are facing challenges
regarding the lack of awareness and concern towards the GST in retail sector.

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10. Are you satisfied with the overall
performance of the Impact of GST in retail sector?
7%
13%
Fully Satisfied
20% Less Satisfied

Satisfied Dissatisfied
60%
From the above Pie chart, 60% of the respondents are satisfied with the
overall performance. 20% are however less satisfied and 13% are fully satisfied.
A few numbers of respondents’ falls in the categories who are not satisfied with
the overall performance of the tax system.
The rating has been 3 and 4 level range has been selected at most by the
respondent.

53
BENEFITS OF GST
A. Reduced Taxes
GST will reduce the tax burden on retailers as they pay many different forms of tax in the
current scenario such as CAT, CST, Octroi, service tax, and much more. GST will streamline
everything into one single tax so that it will be easier for the retailer to understand the taxation
and to pay it in one shot.
B. Seamless Input Tax Credit

GST will reduce the burden of tax on the retail sector as it will set off tax starting from the
producer’s point to the customer point. GST will make an impact on the flowing effect of taxes
and help to streamline into one category.
C. Increased efficiency in supply chain

Since the retail business can be carried out in every state upon single registration, the
retailers will not have to maintain warehouses in every state, and this will be very beneficial
regarding cost to the retailer. The transportation industry will flourish as they would carry more
goods from one state to the other as it will become easy to transfer goods under GST. The lead
time will also reduce in transporting the goods as the inter-state boundaries would be more free-
flowing. GST will help the retail sector become more efficient in their operations.
D. Tax on promotional items and gifts

In the new GST model, any supply without consideration will attract tax and therefore,
everything will have to be accounted for. The retailers would give out gifts and promotional items
with products as a part of their marketing strategy which used to be tax-free in the current
taxation system. When the GST gets implement, no such rule will be applicable and the retails
will have to pay tax on the gifts and promotional items as well, therefore, re-think their
promotional strategies.

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E. Growth of Retail Market
GST will lead to the unification of markets as it will streamline the state and the central tax
and eliminate all the confusion of taxation in different markets. The retailers can easily expand
their business beyond boundaries as they have to register their business only once and then can
carry operations in all the states. This will also contribute towards the growth of the retail market
and help boost the economy of the country.
F. Better strategies
GST will force the retailers to re-think their supply chain strategies and re-model their
network as it will open a lot of doors and opportunities for retailers to expand their business. It
will give them the freedom to draft better business strategies and implement it for further growth
of the retail sector.
G. Reduce complications
The retailers would be able to carry out the business with more ease as the taxation, and
other policies would be streamlined under the new GST rules, and they would not have to waste
their time in paying various taxes and waiting to fulfill all other policy requirements of the
current taxation system.
H. Beneficial for start-ups

The retail sector would start attracting a lot of start-ups as they would have to register their
business only once and also claim the benefits of taxation for start-ups under the new GST laws.
They would also be able to carry out business operations more freely with the new policies in
place and would get more attracted to join the retail sector.

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TYPES OF GST
GST has four different kind of taxes namely CGST,SGST,
IGST and UGST
CGST
CGST stands for CENTRAL GOODS AND SERVICE TAX, the tax is levied based on
intrastate supply of goods and services. The share of GST tax is redirected to the revenue
department of central government. CGST replaces all the current Central taxes like Central
Excise Duty, Service Tax, Custom Duty, SAD, etc. the share of this tax compensates all loss of
current service tax and excise duty of the central government. In case of local sales, Under
GST 50% quantum tax is transferred to SGST.
SGST
SGST stands for STATE GOODS AND SERVICE TAX, this tax is similar to CGST ,as part
of tax which is diverted to the state government has been credited to revenue department of state
government. In SGST ,tax are exacted by within one state where transaction of goods and
services take place. SGST compensate the loss of other existing tax like sales tax and value added
tax(VAT) which was replaced all these taxes and has been a sole claimer of the revenue to the
state government. In case of local sales, 50% of quantum tax which was under GST has been
redirected to SGST tax.
IGST
IGST stands for INTEGRATED GOODS AND SERVICES TAX . This tax is applicable
when transactions take place on interstate or when two states involved in purchases of goods and
services. This tax is collected by central government. One part of tax is transferred to central
governement and rest is transferred to the state government.
UTGST /UGST
UTGST stands for Union Territory Goods and Services Tax. UTGST provide the same
benefits as SGST. The main purpose of UTGST bill is to levied tax on every purchase of goods
and services which take place within intrastate. This tax is only applicable to union territories of
India namely Andaman and Nicobar Islands, Chandigarh, Daman, Diu, Dadra, Lakshadweep and
Nagar Haveli.

56
IMPACT OF GST SYSTEM TO RETAILERS
Retail sector is one of the key pillars for Indian economy and it accounts for around 10% of
Gross Domestic Price (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
As per current tax scenario, retailers are indulged to about 30% indirect taxes such as
CST,VAT,service tax on warehousing, octroi,excise duty and many more. Retailer tax burden
shall be lessen by GST system as it will assign everything into a single tax .So, simplified tax
structure will come into existence by eradicating cascading of taxes.
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 make way for distribution of efficient channel and reduce the
complication for retailers.
Streamlined supply chain
GST has paid way for negative impact on warehouse etworks for retail businesses. Due to
the aboiliton of CST under GST law ,warehouses are no longer required for retail businesses in
every state.Logistics will become efficient too as state border check posts will go irrelevant.
Retail business lead power will improve due to long queues are found to be reduced as well as
free-flowing of goods and waiting time.

57
Gifts, free samples also taxable
GST will come under supply of goods instead of sales or manufacturing. Under GST, any
supply without consideration will result in tax.Retail sector comes up with many offers like buy
one get one free or some freebies on larger goods, every now and then.Tax will be imposed om
such gifts as well when GST comes into play. 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. Under GST, which is a
destination based tax, tax is collected by the state where the goods or services will be consumed.
Therefore, it becomes highly imperative to select the appropriate place of supply for making a tax
payment. On careful evaluation of the GST model, it should be noted that POS for retail will be
the location of the goods at the time of supply to the customer i.e. the location of the outlet/store.
It can be deduced that for retail B2C transaction, CGST+SGST will becharged. Even for home
58
deliveries made by a retailer within his local limits, the rule remains the same. Therefore, under
the GST regime, the place of supply for retailers will be the final location where the goods are
delivered to the customers.
STATEMENT OF THE PROBLEM

GST implementation resulted in simplified system of indirect tax in the country. Thereby,
enables perpetual business transactions across our country and also around the world. As per the
international reforms the arrival of GST has forced retail sector to renew their strategies,
supply chains, costing and systems which is apart from meeting the quality standards. Due to the
lower cost structures raised from tax benefits (if turnover is less than 1.5 crore) disorganised
retailers have grown faster compared to organised rivals. India’s standard shifts to the
Goods and Services Tax (GST) management brought majority of retailers into the indirect tax net
for the first time and thereby increased compliance costs for retailers. Complying with GST is bit
complex for retailers at present. However, in the long run it will benefit for concise and medium
scale businesses and for the consumers as well. By considering the above statement, the present
study conducted a research to identify the impact of GST system to retailers. The overall effect of
GST on retail sector are reviewed and adverse effects observed were addressed in this study.

59
CHAPTER NO 5: CONCLUSION AND SUGGESTION
CONCLUSION
There are approx. 140 countries where GST has already been implemented.
Some of the popular countries being Australia Canada, Germany, Japan, and
Pakistan, to name a few. Implementation of GST impacts a nation both ways,
positively and negatively. Ignoring negative aspects, positive aspects can be taken
into consideration, in order to improve the economy of the country. In order to
measure the Impact the GST we need to wait for the time and the Government
needs to communicate more and more about the systems. It could be a good way to
reduce the black money and good effort by the Government of India after the
Demonetization of the money in 2016.
The taxation of goods and services in India has, hitherto, been characterized as a
cascading and distortionary tax on production resulting in misallocation of resources and
lower productivity and economic growth. It also inhibits voluntary compliance. It is well
recognized that this problem can be effectively addressed by shifting the tax burden from
production and trade to final consumption. Thus, a flawless GST law in the context of the
federal structure would optimize the effectiveness. GST is a well-designed destination-based
value added tax on all goods and services which is the most elegant method of eliminating
distortions and taxing consumption. Under this structure, all different stages of production
and distribution can be interpreted as a mere tax passthrough and the tax essentially sticks on
final consumption within the taxing jurisdiction.
Further, the pattern of consumption will be the criteria for accrual of tax revenues to
states. Accordingly, the tax collection will go the states having higher consumption as
compared to the present system of collection by manufacturing states.
The GST Council finalized the tax rates for most of the goods and services and has
backed the 1st July deadline for rolling out the unified indirect tax that will help create a
single national market and ensured that items of mass consumption bear the least tax burden.

60
Thus, based on the current tax rates (central excise and VAT) for key product segments
across sectors and the finalized GST rates, we expect most sectors to gain or otherwise in a
limited way.
As discussed above, there is a mixed response from the FMCG sector, with some
viewing it as positive, while many others have expressed disappointment. The impact on
FMCG firms will depend on their product mix, given that the tax rates have gone up for
some products and have fallen for others.
In the light of the above discussion, the authors have say about the impact of GST on
retail sector that GST has laid the path for a more organized and transparent retail sector for
budding, small and big players alike.
The loopholes are the technical glitches of GSTN Network and taxpayers’ non-compliance.
The GST Council can surely overcome these issues and ensure proper compliance by taking
measures like educating people through social network websites as well as NGOs. For a tax
system like GST to work, government and people must be responsible and compliant. There
are many more advantages of GST on retail sector under the new GST laws and
it would be a great boost for the retail sector as the policies and taxation would be
streamlines under one head. The businesses would flourish more contributing to the growth
of the retail industry and in turn of the economy as they would be able to carry out the
activities without any hindrances, more freely, and be able to expand the business into
different states without worrying about the additional costs. The supply chain will benefit
tremendously as the cost of transport and warehousing will reduce under the new GST laws
and help the retailers scale their profits, which could also lead to reduced prices for the final
consumer over a period of time. The retailer can directly pay the taxes online and will not
have to go through a middleman.
In case you are confused about GST as a business owner, feel free to consult the GST experts
at LegalRaasta. You can get comprehensive assistance on GST Registration and GST Return
Filing. You can also use our GST software for doing end-to-end GST compliance.

61
The GST system is basically structured to simplify the multiple indirect tax system in India.
A well designed GST is an attractive method to reduce the tax burden. This study traced out
the fact in the study region that retailers have given mixed opinion about the implementation
GST in the study region and they have thought that in future days this move will be
beneficial for retail traders. Added to this, few respondents have given politically motivated
views and stated that central government move of implementation of GST negatively
impacted on sales volume and income of retail business. On priority, it is up to the
government to address the capacity building amongst the lesser-endowed participants, such
as the small-scale manufacturers and traders. It is clear from the field that retailers have not
very much angered with the central government move of implementation of GST in the
study region. GST will become good and simple, only when the entire country works as a
whole towards making it successful.

62
SUGGESTIONS
It was better opportunities & growth of Retail Market upon
implementation of GST, analysts predict unification of markets. Thus, biggest
of the impacts of GST will be in the widening of potential markets for the
retailers. Retailers would be ready to explore markets across diminished
boundaries leading to better growth of the retail market. From both taxation and
operations perspective, GST will clearly have a positive impact in the retail
sector. These industries will have to re-evaluate their current supply chain
strategy and re-structure their network. The way the retail sector is going to
design their supply chain network will be a crucial factor since it would give
them the opportunity to save costs around an overall 1 % – 1.15 % of sales.
Researcher has traced out some important findings of the study. Based on
the findings, to resolve difficulties in implementing of GST in the study region,
researcher has offered some valuable/suitable suggestions. Such are as follows:
GST is the tax that imposed from producer point to consumer point. Small
retailers even today not able to make transaction along with GST bills in village
and municipality level. In this regard, here researcher suggested that government
has to place strict vigilance on such transitions particularly in the study region
and country as hole in general.

63
 BIBLIOGRAPHY
Book-
 Tax law prasctice by (Institute of Company Secretaries of India)
 WEBLIOGRAPHY
 Girish Garage (2014) highlighted upon the objectives of GST, possible
challenges and threats and then, opportunities GST brings in
strengthening the economy.
 Jaspreet Kaur (2016) has thrown light on GST, its features and also
effect of GST on prices of goods and Services.
 www.firstpost.com
 www.scribd.com
 “How GST will impact sectors”,

http://economictimes.indiatimes.com
 “GST-Analysis and Opinions” cleartax.in
 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

64
References
1. Chandu RK. GST in Indian Economy: Its Benefits and Impact, International Journal of Science
and research, 2015; 759-761.
2. Garg G. Basic concept and features of Good and Service Tax in India, International journal of
scientific research and management, Issue. 2014; 542-548.
3. Kashif Ansari Al. Impact of GST on Indian Startups, International research and educational
Journal, Issue. 445-448.
4. Kishore Kumar Reddy. Goods and Service Tax (GST) advantages and Disadvantages in India,
IJARIE-ISSN (0)-2395-4936, 2017; 1560-1564.
5. Kharub M. GST in India: Concept and Swat Analysis, Research gate. 2018; 2:489-496.
6. Malini C. India's Tax System: Increasing Progressivity Yojana. 2016; 12-14.
7. Pankaj Kumar. et al, GST in India problems and prospects, Asian Journal of Management
8. Research. 2016; 6(3).
9. Rupa R. GST in India: an Over view, International Education and Research Journal. 2.
10. Issue. 2017; 2:88-89.
11. Rustagi TR. Indirect Tax Reforms in the Indian Economy. 1998; 23:47-59.
12. Santhosh Dalvi. Analysis of GST law: Is your business prepared for the change. 2018; 1-21.
13. Sanjoy Roy. Transition to Goods and Service Tax (GST) Regime: Rational and
14. Impasse, the New Journal. 2016; 14(3).
15. Receipts Budget 2010-11 to 2018-19, Government of India.

65

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IMPACT OF GST ON RETAIL SECTOR

NISHANT VIJAY ATWAL

Under the Guidance of

PROF. MAYURI KAMBLE

JEEVANDEEP SHAIKSHNIK SANSTHA POI’S

PROF. MAYURI KAMBLE

I would also like to express my sincere gratitude towards my project guide

Nishant Vijay Atwal

Chapter No. Title Page no.

Impact of GST on Retail Sector

Impact of GST on Retail Sector

Impact of GST on Retail Sector

Impact of GST on Retail Sector

INTRODUCTION TO CGST ACT, 2017

(Source of introduction Book by ICSI)

Impact of GST on Retail Sector

TYPES OF TAX SYSTEM IN INDIA.

Tax is the major source of financial charges to impose by Government of

 Direct Tax – Income Tax and Wealth Tax etc.

Impact of GST on Retail Sector

2.1. OBJECTIVES OF THE STUDY

Following are the objectives of the study:

 To study the implementation of GST business practices

 To understand the concept of GST.

1. To Study the effect of GST on Small Retailers.

2. To study the impact of GST on small Retailers.

Impact of GST on Retail Sector

III. Hypothesis: H0: GST has no significant impact on Small Retailers.

2.2. SCOPE OF THE PROJECT

IMPACT OF GOODS AND SERVICE TAX ON RETAIL

There are two types of impact of GST on Retail Sector......

Sr. No. Class of goods Commodities covered Rate of tax

Impact of GST on Retail Sector

A. Positive Impact of GST on Retail Sector

Benefits of GST on Retail Businesses

The following are the benefits seen in the retail business.

 It eradicates cascading effects of taxes i.e., tax on tax.

Impact of GST on Retail Sector

rollout. The nationwide GST will overhaul India's convoluted indirect

1. Proposed GST Rate Is Higher Than VAT

Impact of GST on Retail Sector

Critical issues in trade incentive and discounts:

Impact of GST on Retail Sector

Raman S (2010), Migration to GST: Preparedness and level of Knowledge,

Impact of GST on Retail Sector

Parkhi did an exploratory research in an article GST in India; the changing

1. GST eliminates the cascading effect of tax

2. Higher threshold for registration

TAX THRESHOLD LIMITS

3. Composition scheme for small businesses

Under GST, small businesses (with a turnover of Rs 20 to 75 lakh) can

4. Simple and easy online procedure

The entire process of GST (from registration to filing returns) is made

Impact of GST on Retail Sector

TAX RETURN FILING

6. Defined treatment for E-commerce operators

Again, these e-commerce brands were treated as facilitators or mediators

All these differential treatments and confusing compliances have been

Impact of GST on Retail Sector