GST Impact on Small Retailers

Under the Pre-GST tax rules, wholesalers and retailers escaped the tax liability as there was no mechanism to trace transactions, but this will change under GST. Read more

Touted to be one of the two greatest changes in the Indian economy in the last few decades, GST (the other one being Demonetization) had a lot of buzz surrounding it ever since August 3rd, 2016, the day it was announced.

A single tax structure is definitely a welcome move and the introduction of Goods and Services Tax (GST) seeks to do just that by way of amalgamating a large number of Central and State taxes into a single tax. GST will not only address the concerns of double taxation but will also help in reducing the overall tax burden on goods and services. Furthermore, it will also help in making Indian goods competitive internationally thus providing a much-needed boost to the economy.

How small retailers will benefited from GST?

As far as organised retail is considered GST would have a positive impact but for the entire retail sector, we need to see the impact in light of small retailer and shops.

The question implicitly assumes that GST is favourable for such small businesses. Let’s first determine if that is true before trying to answer “how”.

First of all, small businesses are not covered under GST. The minimum threshold to be actually covered in GST is ₹20 lakh. So if your turnover is below that limit, you are anyway not liable under GST. In that case you will not have to maintain records or file returns under GST. Hence this complication does not exist.

Second, if your turnover is above that number, and you are not maintaining records, GST is not a good news for you because you will need to start now. One possible reason why you might not be maintaining records is that you were purchasing your material without paying VAT (which is possible since the question mentions retail business – and retail customers usually don’t insist on invoices anyway).

But after GST, it will be difficult to purchase without invoice. And as such you will want to pass on the input tax credit to the customer… which would mean that you will have to maintain records under GST. I wouldn’t call it “favourable” as such.

Then there is the third category: people who have a turnover below ₹ 20 lakh but who still might want to register under GST (it’s not compulsory, but you can do so voluntarily). This will help you to get more customers, since many customers will want to purchase with an invoice after GST implementation, and if you are not registered that might be an issue for them. On the other hand, you will need to be familiar with the GST compliance anyway.

Impact on retail sector can be summarized as below: 

  • After GST Organized sector and paper of unorganized sector will be collected due to uniformly tax rates in all over India and check the availability of tax credit on every transaction.
  • Small suppliers with revenues up to 50 lakhs can acquire benefit of structure plan where tax can get compensated @1% of sales value and also pleasure in upkeep of records and records
  • The limit restrict for signing up under GST for investors has been improved to 20 lakhs from current restrict of 5 to 15 lakhs based on the state VAT limits
  • E-commerce in already being affected by several taxations and access taxation in various declares. GST would help E-commerce to gain hugely due to elimination of access tax and accessibility of Feedback credit score for all taxation paid
  • Small shop or suppliers who are promoting through e-commerce route would need to maintain some information and is topic to tax selection at source @ 2% by E-commerce Company though the same can be modified while making payment of tax responsibility by these little shops
  • All taxpayers except structure taxpayer need to computer file 3 profits on per month foundation on Tenth, Fifteenth and Twentieth of next month respectively which would result in some additional per month cost. But there would be a huge saving in form of input tax credit score on taxation compensated for various services like telephone costs, professional costs etc and taxation compensated for the purchase of products from other declares.