The tax structure in India was complicated, a challenge that many businesses in India faced. Under the NDA government, a new reform was brought to the tax structure. These reforms were in the form of introducing the Goods and Services Tax, also known as GST. The government implemented GST on 1 July 2017, impacting every commercial entity in India. For some, the introduction of GST was positive news, but for others, it had a negative impact.
India has a huge retail sector to support the population of 133 crores, so it is natural for the GST implementation to impact the retail sector in India. Let us now look at the impact of GST on the Retail Sector in India.
Impact of GST on the Retail Market in India
We have compiled some of the points below to demonstrate the impact of GST on the retail sector in India. Check out the details now.
- Best Suited For Start-ups – In the initial days, a tax rebate was announced for entrepreneurs and start-ups. The government keep launching new schemes from time to time, and this has made some retail businesses more profitable. This helps the start-up in the nascent stage to make space for themselves in the market.
- Input Tax Credit – GST has a provision for the input tax credit, which was introduced with the implementation of GST. Under this provision, a retailer can claim the credits for the tax he paid on purchasing the input. This reduces the cascading effect of the tax. It prevents double taxation, and the benefit is passed on to the customer.
- Lower Tax Brackets – Before the GST, the tax rates were higher, and many different taxes had to be paid. With the GST implementation, the tax rates have been reduced, and many things have become cheap. Many dairy, fruit and vegetable products fall under the 0% tax rate. Even the handloom and some essential grains fall under a 0% tax rate. Some essential things required in daily life fall under the 5% or 12% tax bracket.
- Simplification of Taxation – All the taxes on the invoices were replaced with just the GST. This made it easy to understand taxation, and at the same time, it also made it easy for businesses to make changes to invoicing software.
- Sin Tax – The government has taxed sin products in the 28% category. This discourages people from consuming these harmful products. Some items in the 28% category are caffeinated beverages, smoking pipes, tobacco products and air conditioners.
GST in Retail Sector: The Future
With time, the GST policies have come a long way. Earlier, there were many tax slabs, which have been reduced with every passing term. At present, there are just four tax slabs for GST. These are 0%, 5%, 12%, 18% and 28%. The GST Council is helping businesses with their grievances and queries. In addition, the GST Council is very prompt in addressing the issues for the users. In the future, some additional steps can be taken by the GST Council or the Finance Ministry to make the framework more efficient. Some of these steps that can be implemented are –
- The government can plan to reduce the number of tax slabs to 3 or reduce the maximum GST rate that is presently being charged.
- Over the years, the process of filing GST has been simplified, but we feel there is little space for more. The government can take additional steps to improve the user interface and make it a self-service portal.
- The government can implement some tax policies to help local or small businesses. The present scenario is killing small businesses as they prey on large entities.
- The GST should be implemented everywhere. Presently, there are additional taxes on Petrol, Diesel and Liquor.
The overall impact of GST on the retail sector has been positive. It has made it easy to file taxes, and it has made it easy for the consumer to understand the taxation policies. The new taxation system has added transparency by removing all the different layers of taxes from the invoicing systems. With time, the taxation policies of India are maturing, and it is benefiting not only the businesses but also the consumer. The government, people and businesses play a key role in implementing, adopting and succeeding GST in any sector.