Impact of GST on dealers and retailers

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Retailing has been a part of the Indian business economy for decades. It has become more and more organized over the years. The people are also finding it as a likeable option as it offers increased product choice under one roof. People get an enhanced shopping experience as well as value for money. As an extension of the retail segment the dealerships have also gained prominence over the years. Here also you will find significant growth especially in the automobile and white goods industry. People are able to see multiple models and latest offerings on display and are able to make their choices easily.

The introduction of Goods and Services Tax (GST) in India is now a certainty and is expected to be in place in 2016-17. Its impact on the retail sector and dealerships is significant. It is quite likely that the retailers and dealerships would be one of the biggest beneficiaries of this proposed system of taxation. In spite of the fact that the retail sector has evolved as an organised revenue generating sector, it still faces a number of challenges posed by the current system of taxation.

The retail sector and dealerships are exposed to litigation on various fronts due to the inherent flaws in the current taxation system. The government has been trying hard to bring FDI into the country and has also been making efforts to create a business friendly environment to ease out the system of doing business in India. GST is a very effective tool to drive this environment. With the Bihar elections already coming to an end the focus is once again going to be on the GST in the winter session of the Parliament.

The cascading of taxes is a major issue with the retail and dealership segment. They are unable to offset the credit of the input taxes that is the excise duty on procurement of goods and service tax on procurement of services like rentals, freight, and advertisement etc. against the output value added tax. In the current taxation system the output VAT can only be discharged by utilising the input VAT; the input service tax, which accrues on account of rentals, becomes a cost in the system. This additional cost eats into the margins of the retailers and dealerships. This issue is likely to be addressed with the introduction of GST and benefit a huge population of retailers and dealers. This possibility has emerged from the fact that both goods and services will be taxed under the common GST head.
The current system of taxation only recognizes manufactures and service providers and not retail traders. Under the GST regime the taxable event will would shift to ‘sale of goods’ from the current ‘manufacture of goods.’ This will lead to re-design of input credit regulations with the inclusion of trading that is the buy and sell arrangement.

At present there is a large variance and rate differentials prevailing in the VAT applicability in the various states. The GST is likely to remove these anomalies with uniform rates and single system of applicability across the nation. This will again benefit the traders and dealerships with regard to the simpler compliance requirements.

5 thoughts on “Impact of GST on dealers and retailers

  • Please clarify me that under the GST regime , Dealer and retailer has to be submit their VAT return or GST return quaterly

    • Sir,
      Return is to be filed on monthly basis except in case of Dealer opt for Composite Levy u/s 8 of Model Law. In case of Composite Levy, return needs to be filed quarterly. Apart from that a Annual Return is also to be filed.

  • Sir,
    In which department we have to file returns
    whether it is sales tax (VAT) department or central excise department .
    whether they will merge both the department .

  • 1. Dealer dealing with vat exempted goods will not get the credit of inputs totally.**
    2. Retailers are charging VAT , ST on most of the goods then they are eligible for setting of the inputs of VAT ST on rentals, advertisements and other taxed inputs
    Then we’re is question of not claiming the beniift of credits.

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