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Impact of Goods and Service Tax on the Retail Industry

There are huge benefits of GST on retail sector to alleviate the problems of India’s indirect system which poses a serious threat to the formation of a single common market.. Indian retail sector is one of the fastest growing sector being 5th largest retail destination in the world. The retail industry is growing in every corner of the country. On July 1st GST has become a reality in India.

Implementation of GST will have significant impact and will change the manner in which business is carried out in comparison to the previous tax regime. With a single rate being applied to all goods and services, there will be a significant redistribution of taxes across all categories resulting in reduction in taxes on manufactured goods and hence impacting the pricing of the product.

This blog discusses in detail the impact of GST on the retail sector. Below factors will significantly change the dynamics of the retail sector in India:

Decreased Tax: GST has decreased the burden of tax on retailers as they have to pay tax in various forms of tax in the previous scenario. This included excise duty, VAT, CST, service tax on warehousing, consulting and rent, Octroi and entry tax. GST will help to streamline the taxation system.

Seamless Input Tax Credit: In the previous tax regime, input tax credit was only available on VAT not on service tax and import duty. But GST has set off tax starting from the producer’s point to the customer point.

Enhanced Supply Chain Efficiency: Single registration has enable retailers to carry out business in every state. A retailer need not to maintain a warehouse in every state and that will certainly decrease the supply cost to a retailer. GST will help the retail industry to become more efficient in their business operations.

Tax on gifts and promotional items: It is a common practice to offer promotional offers like Buy one Get one etc. in the retail industry. As per GST model, these gifts will also attract tax.

More Growth and More opportunities: GST has lead to the integration of market as it has decreased the confusion of the taxation in the retail industry and streamline the state & Center tax. Retailers have to reconstruct their strategies and it will open the door of opportunities to the businessmen.

The impact of GST on retail sector will be very positive from both taxation and operations point of view.
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