Published on:
January 25, 2023
Shreeja Ray

Impact of GST on Wholesalers and Retailers

The Indian economy has been greatly impacted by the GST Act. The Act is regarded as the biggest change to indirect taxes to date. It guarantees the creation of an impartial foundation for all goods and services provided in India. In this post, we'll go over the effects of the GST on wholesalers and retailers in great depth.

India's retail and wholesale commerce, which relies on cash transactions, is more than 90% unorganized. Both large and small businesses have profited from the GST, an internet tax system that is imposed at every point where value is added to goods or services.

Impact of GST on Retailers

In India, the retail sector is more than 90% unorganized and dependent on cash transactions. The GST has had a favorable impact on small shops as well because it is an internet tax system that is assessed at every point where value is added to products or services. One of the main benefits of GST for retailers has been the ability to claim input tax credits. Another benefit is the simpler process for entering new markets.

Impact of GST on Distributors

Distributors and wholesalers are essential components of the country's supply chain. The impact of the GST on wholesalers and distributors is criticized heavily since it is said to increase their tax obligations. Most of the time, this is not entirely true. Simply put, GST allows for the online tracking of the entire supply chain, which eliminates the widespread tax evasion that used to occur in wholesale and distribution. Although the high GST rate on telecom services now makes the GST impact on telecom distributors unfavorable, it is anticipated that the telecom sector would be transferred to a lower GST tax tier in the future.

Problems Faced After Implementation of GST

1. Technical problems:

Wholesalers and retailers had very little time to research product classification and update IT systems to reflect GST rates on invoices because the rate of change in products was so rapid. The 23rd and 28th GST Council sessions, conducted in November 2017 and July 2018, respectively, saw the 28 percent band items reduced from 228 to 37 percent, demonstrating the extent of the rate structure shift.

2. The challenge of pricing reprints:

Every time a rate change is announced, retailers are required to update their ERPs. The impact of such frequent rate modifications on pricing choices also depends on such rate fluctuations. Issues included the overnight reprinting of MRPs on goods kept at various locations or in transit as a result of price modifications and reprinting of Maximum Retail Prices (MRP) on remaining items.

3. Product classification issues:

There have been disagreements about categorization as a result of the current four-tier GST rate structure. The problems for the retailers have gotten worse due to unclear product categorization. In the lack of a precise justification or precedent, some items are capable of dual categorisation.

4. Problems with e-commerce

Under GST, the concept of Tax Collected at Source (TCS) was created. In order for sellers to offset their tax liability, e-commerce operators are required to deposit TCS on every online transactions made through their website. The problems that could occur include different TCS returns, timing differences in deductions, and TCS set-off, to name a few.

Frequently Asked Questions

What is the current structure of the GST rate?

There are four tax slabs for the GST compensation CESS on selected products, in addition to commodities that are taxed at zero percents: 5, 12, 18, and 28 percent (fully exempt). Consult the GST tariff to find the tax rate for particular goods and services.

The government has allowed the MRP to increase due to the increased impact of the GST. Does this apply to stock owned by dealers and retailers as well, or is this only an option for stock held by producers and importers?

The rates may fluctuate in areas where the tax incidence has increased the GST. One must also adhere to the requirements of other laws, such as the Legal Metrology Act.

The 60 percent CGST or SGST rebate is given to producers, wholesalers and retailers, or both?

Manufacturers are prohibited from using the facility, therefore no.

How are time-expired pharmaceuticals transported from stores to producers for destruction?

If the person surrendering the expired pharmaceuticals reduces his ITC, the manufacturer may issue a credit note within the time frame specified in sub-section (2) of section 34 of the CGST Act, 2017. Because the products were destroyed after their expiration date, the manufacturer must reverse his ITC. If the items are returned beyond the deadline specified in section 34(2) of the CGST Act, 2017, the registered person returning the products is required to file a tax invoice since this constitutes a supply in accordance with section 7 of the CGST Act, 2017.


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Updated on:
March 10, 2023