How GST is going to play in Retail?

In What’s Happening in Retail by Elargirindia0 Comments

The passing of the much awaited Goods and Service Tax (GST) in the Rajya Sabha today brought relief and a sense of accomplishment among the Retail and eCommerce fraternity.

Rasul Bailay and Sharmila Das

GST is an attempt to unify the nation, an effort to create one single national market. For Retail industry it is a welcome step as the passing of the bill means a seamless integration of goods and service transaction across the states. It will surely going to favour the macro economy in general and retail in particular.

How? GST is a comprehensive tax levied on manufacture, sale and consumption of goods and services at a national level. Under GST there will be no difference between goods and services. GST tries to eliminate indirect taxes and mitigate cascading or double taxation issues and leads to a common national market, with elimination of state boundaries.

The present cumbersome tax system puts challenges to the manufacturers, distributors and retailers. GST aims to minimise the hitches in double taxation: primarily eradicating cascading tax and smoothing the flow and structure to make it more seamless and organised. GST would also help to restructure interstate transactions. It will focus on streamlining the taxation methods at different levels across all the states in the country and between the states and central government.

With GST administrative costs would get compressed. A level playing field would be created with a common national market. In Retail, the passing of GST will benefit at different stages of the value chain including, the procurement of raw materials, movement of goods would become less cumbersome, which opens gates for more suppliers /vendors to merge. Following this, a wider base of distributors would be available as state boundary paperwork will not be a hurdle, resulting to better access and low transportation costs. Much needed relief for the retail supply chain system which would reduce in transit inventory, further reducing the working capital requirement. Adding to this, simplified taxes and availability of input tax credits can help fetch better margins.

Passing of GST Cheers Up Retail J Suresh, MD & CEO – Arvind Lifestyle Brands Ltd & Arvind Retail Ltd commented, “There are two impacts. One is in terms of the rate, whether the rate will go up or no. We are okay as long as it’s up to 18 per cent. The current recommendation is 18-20 per cent only. Since textile is not one of the heavily taxed categories, it could be in the merit rate as well. So I don’t see a major impact in terms of tax, whether it’ll go up or not, so on that point of view it is good. GST is likely to benefit industries which are largely unorganized”.

He further elaborated by saying, “There should be some shift in demand from non-compliant people to complaint people, which will be an advantage. Second advantage is, the entire logistics can become much simpler because your inter tax issues will be gone and the overall inter -state movement will become easier which will save the logistics costs as well.

There’ll be a period of settlements because after the changes take place there’ll be some different interpretations of some issues that may lead to temporary additional tax outflow”.

Krish Iyer, CEO, Walmart India shared, “Passing of the GST bill today is an extremely progressive step and long awaited one. GST is one of the critical tax reforms which has potential to create one single market in India for goods and services and will boost country’s economy significantly.

Implementation of GST will reduce transaction cost of doing business, also reduce food wastage and bring down prices. Hence I am confident that it will not only bring relief to the consumers, but also help retail sector and building supply-chain efficiencies in India in a big way. This is thus a win-win legislative reform for all.”

Click Here for Original Source – Economic Times

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