Goods and Services Tax (GST) is a revolutionary tax reform that was introduced in India on July 1, 2017, replacing a complex web of indirect taxes. GST has had a profound impact on various sectors of the economy, including the retail sector. In this article, we will delve into the applicability of GST on retailers and explore the tax rates that affect them.
GST Applicability on Retailers
1. Threshold Limit:
Retailers need to understand the GST applicability based on their annual turnover. As of my last knowledge update in September 2021, businesses with an annual turnover of less than Rs. 20 lakhs (Rs. 10 lakhs for special category states) were exempt from GST registration. However, this threshold limit may have been subject to changes since then, so it is advisable to check the latest updates from the GST authorities.
2. Composition Scheme:
Small retailers with an annual turnover of up to Rs. 1.5 crores (Rs. 75 lakhs for special category states) have the option to opt for the GST Composition Scheme. Under this scheme, they can pay GST at a fixed rate on their turnover and are relieved from maintaining detailed records. However, they cannot claim input tax credit (ITC) under this scheme.
Registered retailers can avail Input Tax Credit, which allows them to set off the GST they paid on purchases against the GST they collect on sales. This helps in reducing the overall tax liability and is a significant benefit for registered businesses.
GST has a multi-tiered tax rate structure, with four primary tax slabs – 5%, 12%, 18%, and 28%. Additionally, there are items subject to a 0% tax rate (essentially exempted) and some items that attract a higher rate with compensation cess. Let's explore how these rates affect retailers:
1. 0% Tax Rate:
Some essential items, such as fresh fruits, vegetables, milk, and cereals, fall under the 0% tax rate. Retailers selling these items do not charge GST to their customers but can still claim ITC on their purchases.
2. 5% Tax Rate:
Items like household necessities, tea, coffee, spices, and other essential goods fall under the 5% GST rate category. Retailers selling these products must charge 5% GST on the selling price.
3. 12% and 18% Tax Rate:
Many common consumer goods, including apparel, footwear, electronics, and processed foods, fall under the 12% and 18% tax rates. Retailers dealing with such items need to charge GST accordingly.
4. 28% Tax Rate:
The highest GST rate of 28% is levied on luxury goods, electronics, and some other select items. Retailers selling these high-end products are required to charge 28% GST.
5. Compensation Cess:
Some goods, like tobacco and luxury cars, are subject to additional compensation cess on top of the 28% GST rate. Retailers dealing with such products need to account for this cess while calculating the GST liability.
Conclusion
GST has simplified the tax structure in India and brought transparency to the taxation system. Retailers play a crucial role in the GST ecosystem, as they are the final link in the supply chain before products reach consumers. Understanding the GST applicability and tax rates is essential for retailers to ensure compliance with the law and to make informed pricing decisions.
It's important to note that GST laws and rates may have evolved since my last knowledge update in September 2021. Retailers should stay updated with the latest GST notifications and seek professional guidance when needed to navigate the complex world of GST taxation effectively.
Created & Posted by Rohit
Income Tax Expert at TAXAJ
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