The implication of GST for Trading

• Admin
• June 8, 2021, 8:08 a.m.

India’s economy is one of the fastest economies in this world. To offer greater transparency in the businesses Goods and services has been inaugurated by the Government. After an introduction of GST, many unauthorized businesses got shut down. Prior to GST, India has been grappling with many indirect multiple taxes for a long time. In order to simplify business GST is touted. Further, the implication of GST on traders will vary from the nature of the trade. That is wholesale, retail or importers or exporters. In this blog, I am going to tell you the opportunities within the new tax regime that traders can leverage. Additionally the positive impact of GST on trading.

Read on to know the impact of GST on trading for:

• wholesaler
• retailer
• importers & exporters

1 Wholesaler: The major job role of wholesaler to extend the reach of goods and services to interiors of the country. Generally, many wholesalers do cash transaction to avoid some transaction charges. Below we have mentioned some main positive impact of GST on wholesalers market.

• Transparent tax management: Introduction of technology in a taxation system brings transparency in the business. Despite, cash transaction, now wholesalers have an opportunity to go digital. Additionally, they also have a liability to avail input tax credit online. The term input tax credit refers, where the wholesaler will liable to claim the tax on input goods and services.
• Financial Streaming: Since, the whole supply chain including tax follow will be on GST record, the businessmen have a greater opportunity to connect to retailers and suppliers. There will be no ambiguity while paying or receiving. Hence, we can say that the impact of GST on traders will let them do business hassle-free and increase the efficiency of the businesses.
• Re-organization of the supply chain: Impact of GST on traders will empower high visibility and streamlining of the supply chain, providing wholesalers with a transparent view of supply movements. For instance, tax collection, at the “place of the supply” is already mobilizing FMCG companies builds up fewer warehouses and the size is larger than before.
• Easy borrowing through digital lending: Because of financial and tax transaction will be recorded in the GST system, even small traders will have digital records of their company finances and credit status.

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2 Retailer:

It has been found that approx. 92% of retail offices in India are unregulated and unauthorized. After the implication of GST on traders, the percentage is decreased. Here the positive impact of GST on retailers.

•    Input tax credit facility: As same as the wholesalers, the retailers are also liable to claim taxes paid for input goods and services. This will present a cost advantage to retailers. In prior tax regime, if a retailer purchases a refrigerator to store perishable products, they would not able to claim credit for tax paid on it. Under GST, they will able to claim the tax paid on input tax goods and services.

•    Easy of entry into the market: After the introduction of GST, the market has become more friendly than ever. Due to the clarity of process related to the production and better supply logistic, the complexities in availing tax return is reduced. The GST registration process also becomes easier, so it is a great opportunity for new retailers to enter the market.

•    Retail empowerment through technology: Small retailers do not have complete visibility into their stock receipt, payments, etc. And are forced to blindly rely on the world of the suppliers. GST will streamline these supply chain and empower retail market through technology. The retailers can avail all the information with the help of digital technology.

•    Better borrowing facilities: It goes without saying, the retailer scope of business can be expanded by increasing access to finance. However, like any reform, there are certain challenges that need to be addressed. We observe that both retailers and wholesalers must manage the following eventualities of the GST,

-     The higher cost of input services: Input services like manpower, legal, professional services, auditor services, travel expense, etc. will now be taxed at 18%  as against the earlier bracket 15% leading to the higher costs to the wholesaler.

-    The additional cost to upgrade technology: There are so many retailers who are not aware of digital technology. And they need to rely on help from their supplier companies to undergo a technological transformation. This means that supplier companies may need to increase commission for wholesalers so that wholesaler and reseller can invest in the technology. 

3 Importer and Exporter:

According to the finance report of 2016, India is the 16th largest export economy in the world, the net worth of export contributing to one-third GDP. Every import will be treated as an interstate supply, will be subjected to Integrated goods and services tax. And exports will be treated zero-rated supply, i.e no GST will be applied on export businesses.

4 Positive Impact on traders:​

•  No dispute goods versus services: In the present regime of tax structure, the big is whether the transaction amount to sell goods or services. Through this dispute is still may arise from a view of time/place of goods of time/place supply and services time/place of supply are separated.
• Composition level increased: Impact of GST on traders has increased the composition level. In the prior regime, the limit under the composition scheme is 40 Lakhs, whereas under GST the composition scheme is increased up to 50 Lakhs.

• No margin to disclose: In prior tax regime, a trader who wants to pass on the CENVAT credit to exercise duty needs to obtain dealer registration and have to disclose the margin. But now the impact of GST on traders, this is more relevant as a trader is eligible for credit as well as no requirements for separate dealer registration.

Final Say:

The impact of GST on traders is to change the traditional approaches of the business. It is one of the noteworthy steps has taken by the government. If you are looking for the GST service provider, who can help you in regarding GST issues, you can contact us anytime.