The Goods and Services Tax (GST) reform in India is reaping benefits to retail, logistics and FMCG businesses. Analysts are expecting an increased growth in the retail market with total indirect taxes coming down, seamless input tax credit, and a more efficient supply chain as amongst the many other newly introduced changes under GST.
Earlier, indirect taxes included many components like VAT, Octroi, CST etc. The multiplicity of these taxes has been replaced by GST, to a more simplified & uniform tax structure. Tax-free inter-state movement of goods required the issuance of “Form F”but under GST this requirement is now done away with. Similarly, newer compliances have been introduced for encouraging greater transparency and convenience to all.
Reduced taxes & input tax credits can also help retailers fetch better margins.
The burgeoning of markets and rising potential for doing business across geographical boundaries could be seen happening soon. According to a Deloitte report, “The Indian retail market is estimated to be more than US$ 600 billion and one of the top five retail markets in the world by economic value.” While GST is being seen as a favourable move both by Indian and Global retailers, on the flip side some aspects are:
Going forward, all samples, free gifts for promotional use will be liable to tax. Marketers will need to reconsider their marketing strategies aligned to the new GST.
Though this could be inflationary, the Luxury brands certainly treat this as a demerit.
“GST poses a challenge to ECR imports with its multiple tax slabs”, stated Mr. Dinesh Bhatia, Director, Grandmaster Innovations Pvt. Ltd. Recalibrating the ECRs to accommodate various tax slabs is something they are contemplating with their China counterpart. Having said so, Mr. Bhatia also believes that GST has spurred growth in import and sale of PoS systems in certain retail segments.
Going forward, some critical strategic decisions will need to be made in order to stay compliant and benefit most from GST implementation.
Re-structuring of current systems to align with the requirements of a single tax regime.
All-in-all, GST is a progressive step to boost country’s economy by reducing transaction cost, bring down prices and reduce any sort of wastage in the supply chain and, an opportunity for retailers to pass on the benefits to their consumers.