367 week ago — 3 min read
The retail industry contributes 20% to India’s GDP. Estimated to be US$ 600 billion, the Indian retail market is one of the top five retail markets in the world by economic value. One of the fastest-growing markets, it is projected to reach $1.3 trillion by 2020. With this backdrop in mind, let’s understand what the Goods & Services Tax (GST) means for Indian retail.
GST will lead to a seamless integration of goods and services transactions across states. It will positively impact various components in the retail value chain at different stages. Listed below is the impact of GST on various segments of retail business.
1. Processes
Various other concerns, which are yet to be clarified, will be resolved as and when they come, as government has been very proactive in taking up concerns of stakeholders.
2. Supply Chain & Procurement
GST gives an opportunity to bring in efficiencies for procurement and supply chain as it removes tax barriers for inter-state purchases. Since Central Sales Tax (CST) has been abolished, we will see more centralised purchases to take benefit of economy of scale. We will also see bigger warehouses equipped to manage larger transactions.
3. Reduced Tax
The tax rate varies from 0% to 28% for most of the goods under GST regime. If we consider all taxes under current system the rate will work out closer to 30% which includes excise duty, CST, entry tax, VAT and service tax on various activities like rental. So net effect of GST on retail business is positive from tax incidence point of view.
4. Impact on prices
GST provides for seamless input credit of various credits – a provision that was not available earlier. This will have positive impact on retailers cost and in the longer run the same will be passed on to the consumers.
Overall, GST will bring transparency, efficiency and compliance in the system, which will positively impact businesses, particularly retail.
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Article contributed by Sharad Venkta for STOrai Magazine
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.
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