GST FOR RETAILER

GST

The count-down for GST has begun and yet there are so many of us who are still struggling to understand the basic concept of GST, let alone the jargons and rate structures.

With our current tax system being challenging enough, will the introduction of one more tax will simply add to the chaos. Well, not really!! Let us explain with a simple example,

·         The current scenario

Stage I - The Manufacturer

·         Say a dairy in Gujarat has manufactured a box of cheese spread at a cost of Rs. 200.

·         Excise duty charged on this 200 @12.5% works down to Rs.25.

·         From here dairy transports the cheese spread to a cold storage facility in Maharashtra. As goods are sold from one state to another, the transaction attracts CST @ 2.5% on Rs.200 amounting to Rs.5.

Manufacturing Cost	200
Excise Duty @12.5%	25
CST @ 2.5%	5
Final Cost To the Manufacturer	230

Stage II - The Wholesaler

·         At the cold storage, the distributor will properly stack the cheese spread and keep it at the right temperature among other dairy items. For which he will charge a profit margin at Rs.20.

·         As there is value addition within the state, state government charges a VAT of @12.5% on Rs. amounting to Rs. 31.25, (~31).

Cost	230
Profit Margin	20
VAT @12.5%	31
Final Cost To the Wholesaler	281

Stage-III The Retailer

·         Now the retailer will appropriately stack the cheese spread, may be place in a attractive shelf to draw more customers. For his services, he will charge say a profit of Rs 30.

·         It will attract VAT of Rs 39 - which will be settled against the input credit of Rs. 31 in the previous stage.

Cost	281
Profit Margin	30
VAT @12.5%	39
Less: VAT paid on previous stage	31
Final Cost Of The Product	319

Hence the total tax payable upto this stage is Rs. 8 + Rs 30 +Rs 31 = Rs 69

And the final price of the good Rs 319.

·         POST GST scenario

Now against this in a post GST scenario, all regulations related to Excise, CST, VAT will be scrapped of and a single tax will be applicable for all transactions throughout

Let us understand by the same example and compare the scenarios:

Current Scenario		Post-GST
Stage I
Manufacturing Cost	200	Manufacturing Cost	200
Excise Duty @12.5%	25	GST @12%	24
CST @ 2.5%	5
Final Cost To the Manufacturer	230	Final Cost To the Manufacturer	224
Stage II
Cost	230	Cost	224
Profit Margin	20	Profit Margin	20
VAT @12.5% on Rs 220	31	GST @12%	29
		Less: GST paid on previous stage	24
Final Cost To the Wholesaler	281	Final Cost To the Wholesaler	249
Stage III
Cost	281	Cost	249
Profit Margin	30	Profit Margin	30
VAT @12.5%	39	GST@ 12%	34
		Less: GST paid on previous stage	29
Less: VAT paid on previous stage	31
Final Cost Of The Product	319	Final Cost Of The Product	284

Therefore GST will help in bringing bring down the total price of the product to Rs. 284 (35 Rs of less than cost in the current scenario).

Hence GST will help you at not only:

·         Have input credit at each stage

·         Uniformity in payment of tax

·         It will be ultimately easy on your pockets What more do you need. Truly simple, isn’t it

To Do list for retailer

1)    Get proper bill from wholesaler/ distributor

2)    Make sure that your and his GSTN number is mentioned on invoice

3)    If possible make all buying and selling entries/transaction through Computer.

4)    Always remember following 3 dates of each month

§  10^th of every month ( upload your sales) ( it will auto populate purchase as your purchase is some one’s sale)

§  15^th of every month ( review changes if any)

§  18^th of every month ( approve and pay tax)

§ 

HAPPY SELLING