GST Impact on Small Retailers

. 6 min read
GST Impact on Small Retailers

The addition of GST into the overall economic structure of India was by far one of the most momentous changes in terms of tax reforms that the country has ever witnessed. The GST bill was passed on the 6th of April in 2017 at the Parliament, and later it came into force from the 1st of July of the same year. The purpose of replacing all the other indirect taxes with one single tax was to bring about uniformity and stability in the country’s financial scenario. Any regular tax-payer by default now falls under the GST registration, and they have to file returns on both monthly/quarterly and annual bases.

The goods and services tax is levied on both the central and state levels. The tax amount which is collected by the Central Government is known as Central Goods & Services Tax or CGST, and the one which each state government collects is called the State Goods & Services Tax or SGST. The two other GSTs are the IGST or Integrated GST which is collected both by the central and governments and UTGST, also known as the Union Territory GST.

The Significance of GST

This being the third year since the introduction of GST to the country’s economy, people are now much more familiar with the GST details. Every rule had to be changed, and each condition pertaining to the practice of indirect tax collection was altered. Now, instead of having to pay a host of taxes such as OCTROI, Service Tax, VAT, Excise Duty and so on, the consumers are now relieved to pay one single amount which is eventually collected by the government.

The payment method for this tax is quite convenient and simple. The Goods and Services Network is a platform through which tax-payers can update all the necessary details about their financial status, which are mandatory for paying GST. This initiative was taken jointly by the finance ministry and the GST council to provide the tax-paying citizens with a direct way of registering all their data with the authorities.

How to File for GSTR?

The process of GST filing online is one without any complications and can be done very easily.

First, it is necessary to visit the GST site, which can be checked

Then comes the step of the GSTIN registration, where a 15 digit pin known as the GSTIN (Goods & Services Tax Identification Number) needs to be generated. This is based on the PAN and pin code of the state that the tax-payer belongs to.

After that, all the required documents need to be uploaded on the portal. An invoice reference number is then provided to each invoice.

Lastly, when all these documents, sales, purchases and so on are adequately uploaded, check all the details and then start with GST filing online.

Effects of GST on Small Retailers

When the GST Bill was passed, it was made absolutely clear by the authorities that this reform will be highly beneficial for small and medium scale businesses. Since these businesses need whatever financial help they can to hold their footing in the market, it was concluded that opting for GST registration will give them some respite from the cascading tax system. Earlier on, there were different tax rates for different industries, but with the advent of GST, every industry, regardless of their size, now falls under the same rates.

The benefits that small-scale retailers are reaping owing to GST have been listed below:

1. Setting up a business is trouble-free:

If a business has to depend upon inter-state transactions to function, then it is required to obtain VAT registration. But with the varying tax rates and rules in different states only led to burden and an increase in investment, thereby adding to their inconvenience. But with GST, the tax rates are uniform all across the country and with centralised registration, these businesses get the opportunity to build up with ease, and the eventual growth becomes an additional advantage.

2. Quicker delivery of services and proper logistics:

A lot of benefits have been incorporated in the GST bill after careful thinking. One of the most significant of them being the removal of entry tax on goods purchased or manufactured in any part throughout the country. This remarkably speeds up the process of transporting and delivering goods at checkpoints in every state. As a result of this reform, the cost of transportation of goods has reduced for a lot of manufacturers which has again impacted the small businesses in a positive way.

3. Goods and services are considered the same:

This step has again made it easier for small retailers to find opportunities to flourish. The GST bill has taken upon itself to see to it that goods and services are not differentiated anymore. This leads to the simplification of multiple legal proceedings concerning the packaged goods. Since there is no tangible distinction between the product and services, this decreases the practice of evading tax by a great extent. SMEs are only required to calculate the tax amount on the final product, thereby making it easy to prepare the invoice.

4. Opportunity to pay lesser tax:

Before the existence of GST, small retailers were forced to pay tax on multiple levels, which thereby gave rise to the ‘cascading tax’ effect. But now, since the GST has replaced all other indirect taxes, the SMEs now find it very beneficial as it has lessened their tax immensely.  Now that the government has become lenient in the GSTR filing process for SMEs having a turnover of Rs. 1.5 crore by making them pay quarterly instead of monthly, it will now be a lot more convenient for them.

But, in the hopes of benefiting the small and medium scale retail businesses, the imposition of GST has had a negative impact on them as well. Here are a few of them:

1. Lack of technological facilities:

As is the case of most small retailers and businesses, they do not have the necessary facilities which will give them the benefit to opt for filing GSTR online. Without a choice, they need to acquire the relevant external source that will help them with the process of GST registration. Therefore, this causes an increase in the cost of registration.

2. Compulsory multiple registrations for businesses that function all over India:

With the advent of GST, it is now mandatory for businesses that run in more than one state to register themselves in all those states. This is an extremely unfavourable condition for SMEs since it gives rise to a difficult and more complex situation which did not occur before this.

While the GST has been hailed as one of the most anticipated and required changes in the Indian economy, it has caused these minor issues which have been mentioned above. It is of no doubt that the GST services are greater in number and that it was created with the best interest of the people in mind, it somehow missed out on these minute details which can hinder the growth of small retailers. But, with the increasing rate of business opportunities and with people realising the need for digitalisation, it is safe to say that SMEs will eventually start thriving and take things in their stride and make the most of the benefits that are being provided especially for them under the GST bill.

Also read:
GST impact on Real Estate
The Key Advantages and Disadvantages of GST


Q. Is the Composition Scheme of GST only for small businesses?

A. This scheme has been formulated for the betterment and growth of small businesses in the country. Any tax-paying individual whose annual turnover does not go beyond the Rs. 1.5 crores threshold can opt for this scheme. This scheme enables them to pay tax at a lesser rate and they can steer away from the process of detailed GST billing.

Q. How many types of GST returns are there?

A. There are a total of 15 types of GSTr namely GSTr 1, GSTr 2A, GSTr 2, GSTr 3, GSTr 3B, GSTr 4/CMP 8, GSTr 5, GSTr 6, GSTr 7, GSTr 8, GSTr 9, GSTr 9A, GSTr 9C, GSTr 10 and GSTr 11.