Analysis by Elargir Solutions on Analysis by Elargir Solutions on Impact of GST in Retail Sector

Marking an end to the long and tumultuous debate on GST, the Rajya Sabha has finally approved the crucial Indian Constitutional amendment to turn the bill into law. The LokSabha had already passed the key bill. The bill will now go back to the Lower House to incorporate the amendments approved by the Rajya Sabha and will have to be approved by 50 per cent of all the state assemblies.

Retail Sector would be one of the highest benefiting sector from GST bill, waiting for long now to finish the cascading impact of taxes for the growth of the Industry. With GST, the journey from manufacturer to retailer and to end consumer would simplify and generate savings including the logistics, warehousing, distribution and retailing. While there are positive and neutral impacts on retail and related industries, many sectors like telecom would be adversely impacted. From a short term perspective, the GST might have a minor impact on the inflation; in the longer run it will reap more benefits for the economy attracting high investments across sectors.

For initial years, the central government would be managing the finance compensating all the states for 5 years incurring revenue losses. Before going into business technicalities, let us make you understand as to how it will have a direct impact on prices, with the following simple case of apparel sector.

Currently, the retailers cannot set off these costs like the other industries. Under GST, taxes on services would be available for set off against taxes on goods. With this move, the tax burden to be paid on the rental would benefit the cash flow and profitability of the lessee and retailers

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