Gst in Retail What No One Is Talking About

The passing of the much awaited GST brought a sign of relief among the retail industry. While GST is a big win for retail industry, a lot will depend on the execution of the new bill.

- Suresh Nair

With the passage of the Constitutional Amendment Bill for GST (Goods and Services Tax) by both Houses of the Parliament and more than half of the desired 50 per cent States already ratifying the Bill, it appears GST in India is now an eventuality. Industry and trade have started to gear up for the largest tax reform of India since independence with discussion on GST find prime time with senior management and the Board alike.

GST is proposed to subsume various indirect taxes including excise duty, service tax, VAT, sales tax, luxury taxes, entry taxes, state entertainment taxes, countervailing duty and additional customs duty.

Given that the said levy would apply across the supply chain from procurement to the last mile delivery to customer, GST would have an impact on all operations of business. This would translate into impact on prices, business processes, IT systems, supply chain and profitability in all segments of the economy.

The retail sector is looking forward to the implementation of GST, as there is a potential ‘Pot of Gold’ which could be available to this segment. Key impact areas have been discussed herein below.

Tax savings on procurements

At present, purchase of goods and procurement of services attract multiple indirect taxes. One of the major expenses incurred by retail chain outlets is rent of premises and malls. Under the current indirect tax regime, service tax paid on rentals and various other services is not available as a credit to the retail chain outlets.

Besides, there are other taxes which are either embedded in the cost of goods given the non creditable nature of the said levies or leakages in the current tax regime which contribute to increase in operating costs, which gets passed on the consumers.