GST Impact On Wholesale & Retail Business In 2022: Check New Tax Rates

The GST Act has had a tremendous influence on the Indian economy. The Act is considered the most significant indirect tax reform to date. It ensures the development of an independent framework for all products and services delivered in India. We'll go through the impact of GST on wholesalers and retailers in detail in this article.

More than 90% of India's retail and wholesale trade is unorganised and reliant on cash payments. Because GST is an online tax system that is levied at every point where value is added to items or services, it has benefited both large and small businesses.

The impact of the GST on wholesale and retail sectors

The administration has altered the prices of most major FMCG and retail products since its inception. In May 2017, the GST rate plan for goods and services was released for the first time. As a result, wholesalers and retailers have encountered several problems, as listed below:

1. Technical difficulties:

Because the pace of change in items was so significant, wholesalers and retailers had very little time to study product classification and update IT systems to reflect GST rates on invoices. As a result, the magnitude of the rate structure change may be seen in the conclusions of the 23rd and 28th GST Council sessions, held in November 2017 and July 2018, which saw the 28 percent band items cut from 228 to 37 percent.

While the government's rate reduction was a welcome step, the re-classification of commodities and restructuring IT systems created a challenge for wholesalers and retailers.

2. The difficulty with reprinting pricing:

Retailers have to update their ERPs every time a rate change is announced. The impact of such frequent rate changes on pricing decisions is likewise a function of such rate adjustments. Price adjustments and reprinting of Maximum Retail Prices (MRP) on remaining items caused issues such as overnight reprinting of MRPs on inventory stored at several locations or in transit.

3. Problems with product categorisation:

As a result of the present four-tier GST rate scheme, there have been categorisation disputes. The merchants' issues have been worsened by-product categorisation ambiguity. Some objects are capable of dual classification in the absence of a specific explanation or precedent.

Product classification is a difficulty for the FMCG business under GST. Furthermore, rate structure descriptions do not always match HSN descriptions, causing product categorisation confusion.

4. Concerns over adherence procedure:

Due to the limited timeline, various wholesalers and retailers failed to upgrade their ERP systems to comply with GST. Furthermore, the ERP experts could not incorporate the three tax structures (CGST, SGST, and IGST) into the Global ERP system due to their complexity. As a result, to comply with GST, several wholesalers and retailers were forced to quit the Global Platform(s).

Furthermore, challenges such as credit notes not linked to the original invoice, limitations on setting off credits, and the lack of a facility to file an amended return made it challenging to comply with GST fully.

5. The Anti-Profiteering Rules are not well understood:

The rules describe the anti-profiteering procedures in detail, including processing techniques, panel establishment, and the roles of each authority in the Anti-Profiteering organisation. However, it provides no direction on how a company can identify and analyse the potential benefits of a reduced tax rate or higher input credit availability.

Furthermore, there are no guidelines for making pricing modifications at the business, product, or SKU level. Thus, if profiteering is controlled at the entity level or for a group of consumers, it may not ensure that the price of a particular product is reduced proportionally for all customers, as the goal of such laws may be.

6. Challenges in E-commerce:

The idea of Tax Collected at Source (TCS) was developed under GST. E-commerce operators are required to deposit TCS on online transactions done via their site, which would be available to sellers as a set-off against their tax liability. Different TCS returns, timing discrepancies in deductions, and TCS set-off are just a few of the issues that might arise.

The adoption of the GST has been a watershed moment in India's economic history. Despite some teething difficulties, the GST is projected to help Indian industry (including retail) achieve its objective of a rating of less than 50 on the World Bank's Ease of Doing Business index. The free flow of GST input credits, supply chain rearrangement, import facilitation measures, and rate reductions have already begun to benefit the wholesale and retail industries. It is now up to the government to stabilise the system, remove uncertainty, and simplify compliance. It will provide the wholesale and retail industry with the impetus it requires to spread its wings and crank up its growth engines.

Also Read:

1) Impact of GST on the Indian Economy?
2) Impact of GST on the E-commerce Industry in India?
3) Impact of GST on the logistics sector in India?
4) Impact of GST on IT industry in India?

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FAQs

Q. What is the current GST rate structure?

Ans. The GST compensation CESS on chosen products, in addition to commodities that are taxed at zero rates, is divided into four slabs: 5, 12, 18, and 28 percent (fully exempt). To determine the tax rate for specific products and services, consult the GST tariff.

Q. Due to the increased impact of GST, the government has permitted a rise in MRP. Is this possible for stock held by dealers and retailers, or just for stock held by manufacturers and importers?

Ans. Where the tax incidence has enhanced the GST, the rates might get changed. However, one must also follow the criteria of other legislation, such as the Legal Metrology Act.

Q. Is the 60 percent CGST or SGST refund paid to wholesalers and retailers, manufacturers, or both?

Ans. Manufacturers are not permitted to use the facility.

Q. What is the method for transporting time-expired medications from retailers to manufacturers for destruction?

Ans. In such circumstances, the manufacturer may give a credit note within the time limit outlined in sub-section (2) of section 34 of the CGST Act, 2017, provided that the individual surrendering the expired medications decreases his ITC. Thus, when the time-expired products are destroyed, the manufacturer must reverse his ITC due to the destruction of the goods. The registered person returning the goods must submit a tax invoice if the items are returned after the time limit stipulated in section 34(2) of the CGST Act, 2017, since it constitutes a supply within the meaning of Section 7 of the CGST Act, 2017.