Introduction 

The Goods and Services Tax (GST) is a transformative tax regime that was introduced in India on July 1, 2017. It replaced the complex web of indirect taxes and aimed to streamline the taxation system, promoting ease of doing business. One of the crucial sectors affected by GST is wholesale trade. In this article, we will delve into the applicability of GST and tax rates on wholesalers in India. 

GST Applicability for Wholesalers

GST is applicable to all businesses involved in the supply of goods and services, including wholesalers. Wholesalers act as intermediaries between manufacturers or producers and retailers. They purchase goods in bulk and distribute them to retailers or other businesses. Here's how GST applies to wholesalers:

Registration: Wholesalers with an annual turnover exceeding the prescribed threshold limit must register under GST. As of my last knowledge update in September 2021, the threshold limit was Rs. 20 lakhs for businesses in most states. However, this threshold may vary for special category states. 

GSTIN: Upon registration, a wholesaler receives a unique Goods and Services Tax Identification Number (GSTIN). This number is crucial for filing GST returns and complying with GST regulations. 

Input Tax Credit (ITC): Wholesalers are entitled to claim input tax credit on the GST paid on their purchases. This means they can offset the tax they have paid on raw materials or goods against the GST they collect from their customers. This mechanism reduces the tax burden and promotes transparency in the supply chain. 

GST Rates for Wholesalers

GST rates are categorized into five slabs - 0%, 5%, 12%, 18%, and 28%. The applicable GST rate for wholesalers depends on the type of goods they deal with. Here's a breakdown of GST rates for wholesalers: 

Nil (0% GST): 

Essential food items like rice, wheat, milk, and fresh vegetables are subject to zero-rated GST. Wholesalers dealing in these goods do not charge GST to their customers.

5% GST: 

Items like packaged food, footwear, and some industrial intermediaries fall under the 5% GST category. Wholesalers involved in these goods charge 5% GST on their supplies.

12% GST:

This rate applies to goods like textiles, mobile phones, and spectacles. Wholesalers in these sectors are required to charge 12% GST on their sales.

18% GST:

A wide range of goods, including electronics, furniture, and toothpaste, are subject to 18% GST. Wholesalers dealing in these products charge 18% GST on their supplies.

28% GST:

Luxury items and goods like automobiles, perfumes, and cigarettes attract the highest GST rate of 28%. Wholesalers involved in these sectors must charge 28% GST on their sales.

It's important for wholesalers to correctly classify their products and charge the appropriate GST rate to avoid penalties for non-compliance.

Compliance and Filing GST Returns 

Wholesalers have certain compliance requirements under the GST regime. These include:

Filing GST Returns: Wholesalers are required to file regular GST returns, which include GSTR-1 (outward supplies), GSTR-2 (inward supplies), and GSTR-3 (monthly summary return). Timely and accurate filing of these returns is crucial to avoid penalties. 

Maintaining Records: Wholesalers must maintain proper records of all their transactions, including invoices, purchase orders, and tax payment receipts. These records should be kept for a specified period as per GST regulations. 

Reconciliation: Regular reconciliation of purchase and sales data is necessary to ensure that input tax credit is correctly claimed and the GST liability is accurate. 

Is GST mandatory for wholesale business?

Every business which carries taxable supply of goods/services and whose turnover exceeds the threshold limit of Rs. 20 lakh ((Limit is Rs 10 lakhs for the North Eastern States) is required to get registered under GST. 

Who pays GST wholesaler or retailer?

Indirect tax is collected from consumer whereas direct tax is collected from the person who earns. Hence, as GST is an indirect tax, it will be collected from customer who is the consumer here. Retailer works as a collection agent of government here and nothing else.

Conclusion