GST being the biggest taxation regime that is stealing out the nights of business owners be it wholesalers or retailers. The introduction of GST took place on the 1st of July, 2017 by the President of India. It is a unified taxation system which has subsumed all the indirect taxes including VAT, service tax, luxury tax, and so on. There are so many provisions under GST, that it’s obvious to get confused whether you run a business or just a citizen of India. If we talk about wholesale businesses and retail sector, people are still unclear about certain factors such as their tax liability, the tax calculation and pre-GST effect.
In this post, we discuss the impact of GST on the retail sector as well as the wholesale businesses. Take a look.
Getting Ready for the GST
As the GST is already in the air, businesses need to get prepared if not yet. The Government has passed industry specific provisions due to which there is a lot of confusion among the business owners. However, before understanding the wide list of provisions, one needs to get registered under the GST through GSTN or the applications designed by GSPs and ASPs including GST calculator. As the wholesaler and retail sector was previously packed with a lot of taxes, even now it is going to get some heat with the implementation of GST.
Tax Liability on Retailers and Wholesalers
According to the previous taxation system, usually the wholesalers and the retailers escape the tax liability. It is because there was no mechanism previously to check the actual purchase and sales on their businesses. Most of their transactions are done illegally in which no invoice is issued to the buyer and eventually no entry is done for such sales. However, under the GST regime, for every purchase, seller need to issue and invoice and upload the same on GSTN’s common portal. That’s the reason wholesaler and retailers will be unable to escape out their tax liability.
Effect of Demonetization
During demonetization, wholesalers and retailers were in the shock state as they had to de-stock their inventory and reduce the volume of the goods that they used to supply without the invoice. Hence, this de-stocking of the goods resulted into steep fall in the demand from the consumers. Sales of many companies dropped down eventually while the fall in consumer demand was limited.
Similarly, during the Pre-GST phase, the de-stocking of the goods took place. It was mainly because of the availment of ITC (Input Tax Credit). Previously wholesalers has to pay VAT on all the stocks, however, after the GST taxation system the VAT has been subsumed and the benefit will be given to the business owners in the form of ITC. Still there are certain conditions to avail the ITC which can lead to loss for the wholesalers and retailers. Therefore, to avoid such losses, the retail businesses de-stocked their inventory and after the GST implementation they had to re-stock it again.
After the Implementation of GST, these wholesalers and retailers will not be able to evade the tax because the entire supply and value chain will be tracked online through GSTN portal. This way, businesses will not be able to hide their inventories and have to issue invoice for each sale that they do. Further, they had to upload the invoices every month on any of the GSTN portal. This might result in change of the operando for businesses who worked on thin margins. Also, there could be steep rise in the demand of the goods due to re-stocking of Inventory.
It is expected that GST is likely to bring the positive change in the country, however, it’s more important to know the provisions of the GST compliance beforehand. This will help many businesses to get prepare and contribute to the country’s growth and economy. Government of India has organized many workshops, tutorials, GST calculator and GST software to make the GST compliance easier for the common population of India. All you need to do is, get registered on the GST network through any mode or channel that directly connects your to GSTN such as GST Keeper. It would not only simplify your every month’s task but also allow to track the changes and sales that you’ve made on a monthly basis.