INTERNATIONAL JOURNAL OF

SCIENCE TECHNOLOGY AND HUMANITIES

Full Length Article

Impact of GST on Manufacturers, Distributors and Retailers

Mary J. Priyadharisini a, J. Nisha Mary b, *
a Assistant professor PG and Research Department of Commerce, Vidya Mandir Arts and Science College, Katteri,
Uthangarai, Tamil Nadu -636 902, India.
b Research Scholar PG and Research Department of Commerce, Vidya Mandir Arts and Science College, Katteri,

Uthangarai, Tamil Nadu -636 902, India.

*Corresponding Author
babubalrajr@gmail.com
(J. Nisha Mary)
Tel.: +91 9597381128
Received : 19-7-2017
Reviewed: 25-7-2017
Revised : 26-7-2017
Accepted : 05-8-2017
DOI:
https://doi.org/10.26524/ijs
th1817
Abstract: The GST is a Value added Tax (VAT) is present to be a comprehensive
indirect tax imposes on manufacture, sale and consumption of goods as well as services
at the national level. It will replace all indirect taxes levied on goods and services by the
Indian Central and State governments. It is aimed at being comprehensive for most
goods and services. The goods and Services Tax (GST), implemented on July 1 st, 2017, is
regarded as a major taxation reform till date implemented in India since independence
in 1947. GST was planned to be implemented in April 2010, but it was postponed due to
political issues. The primary objective behind development of GST is to subsume all
sorts of indirect taxes in India. The implementation of GST will give a boost to the
growth engine to developed state in the country. GST has brought in ‘one nation one
tax’ system, but its effect on various industries is slightly different. The first level of
differentiation will come in depending on whether the industry deals with
manufacturing, distributing and retailing is providing a service. The purpose of present
study is to analyse the impact of GST on manufacturers, distributors and retailers.

Keywords: GST in India, GST on Manufacturers, Distributors And Retailers.

Introduction
GST is the critical form of indirect taxation
which is said to the indirect taxation reform ever
since our independence. The GST is said to bring
about the economic integration said by our union
finance minister Arun Jaitley during the budget
speech at 2016 [1,2]. The Goods and Services tax is
levied on the manufacture, sale and consumption of
the goods and services. GST is boost
competitiveness and performance in India’s
manufacturing sector. Declining exports and high
infrastructure spending are just some of the
concerns of this sector [3,4]. Multiple indirect taxes
had also increased the administrative costs for
manufacturers and distributors and with GST in
place, the compliance burden has eased and this
sector will grow more strongly. But due to GST
business which was not under the tax bracket
previously will now have to register [5]. This will
lead to lesser tax evasion.
Objectives of the Study
This study is based on the following objectives:
1. To study about the concepts of GST.
2. To study about the GST rates on manufacturers,
distributors and retailers.
Concept Overview - GST at a Glance
Goods and Service Tax-Explained
The GST is the proposed Indirect tax system
which is levied on the manufacture, sale and the
consumption of goods and services. It will replace
all the indirect tax systems such as sales tax and
value added tax [6-9]. The main purpose of GST is to

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bring about the single uniform system of taxation in  Central GST
the manufacture, sale and the consumption of goods  State GST
and services in India [10-12].  Dual GST
1) Central GST:
The GST is said to reduce the level of Tax
Goods and Service Tax to be levied at the
evasion and the corruption and it also reduces the
centre.
tax burden of the public.
2) State GST:
GST levied at the state.
GST Implementation Process:
3) Dual GST:
o 2000-PM Vajpayee set up a committee to GST to be levied at the State and Centre
draft GST law concurrently.
o 2004- task force concludes GST must be
implemented to improve current tax rate
structure Proposed GST Rate
o 2006-finance minister proposes GST The rate of the proposed Goods and Services
introduction from 1st April 2010 Tax for the certain goods and services are laid down
o 2007-CST to be phased out ,rates reduced by the government which is as follows.
from 3-4%
1. For Goods the Total GST rate is 20 % in
o 2008-ec finalizes dual GST structure to have
which 12% of the tax is levied by Central
separate levy, legislation
while remaining 8% will be levied by the
o 2010-project to computerize commercial
state.
taxes launched but GST implementation
2. For Services the Total GST is 16% out of
postponed
which 8% is for the Central and 8% is for
o 2011-consitution amendment bill to enable
the state.
GST law introduce
3. For the essential Goods the GST is levied at
o 2012-standing committee begins discussion
12% in which is divided equally that is 6%
on GST but stalled it over clause 279b.
for Centre and 6% for state.
4. Currently, it is collected in the form of VAT
which is 26.5% that is Central Value Added
Objectives of GST
Tax is 14% and State VAT is 12.5%.
1. To remove the cascading effect of taxes that
is through this Single taxation system (GST) The above mentioned percentage of Goods
the tax on taxes will be removed easily. and Service Tax is just a proposed value it may
2. To reduce the Tax evasion and Corruption subject to change as per the revisions make up by
3. To bring about the consumption based tax the Executive Committee and the government.
instead of manufacturing
4. To absorb various Indirect taxes and to Applicability and Mechanism of GST:
bring a single system of taxation
5. To remove the prices of goods by having a
uniform system of taxation over the country.
6. To increase the GDP by the exclusion of
cascading effects of Taxation.

GST Model
The GST model consists of three
components or three different varieties of GST.
They are as follows.

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Example for Understanding GST Mechanism manufactured goods due to central excise
Works: duty and value added tax.
 With GST rate excepted at around 18% ,
Manufacturer Sells to Wholesaler: Goods such as TV’s and washing machines
Selling price 100 are excepted to become cheaper
 A unified tax system removing a bundle of
GST rate@6 6
indirect taxes
Selling price inclusive tax 106  Removes cascading effects of taxes which
Manufacturer hands over the GST collected will lead to lower cost to consumers.
 Uniformity of structure all over India
including Jammu and Kashmir
Wholesaler Buys from Manufacturer:  Increased demand will lead to increase
Buys at 100 supply hence rise in production of goods
.The increased production will lead to more
GST 6
job opportunities.
Purchase price 106  A unified tax regime will lead to less
corruption which will indirectly effect the
Wholesaler claims back GST (06)
common man
 The whole process is digitized leaving no
Wholesaler Sells to Retailer: chance of tax evasion with the help of
Selling price 300 digitized record of all businesses. Each
business whose annual turnover is over
GST 18 20lakhs will have to digitalize their business
Selling price inclusive tax 318 for transparency in paying taxes and input
credit benefits
Wholesaler hands over GST to Govt.
 Items of mass consumption like toothpaste
,soaps , hair oil etc. have been put under the
Retailer Buys from Wholesaler: 18% slab rate of GST ,significantly lower
than the 22-24% tax which used to be paid
Buying price 300
earlier
GST 18  In FMCG sector, under GST schedule 81% of
the goods are taxed under 18% tax bracket
Purchase price 318
or below, the remaining 19% are taxed
Retailer claims back GST (18) under 28% slab rate of GST.

Retailer Sells to Consumer: Rate Structure of GST:

Selling Price 500
GST 30
Selling price inclusive tax 530
Retailer hands over GST to Govt.

Benefits of GST:
 Under the current tax rate regime , the
consumers pays approximately 25-26%
more the cost of production for the most

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Drawbacks of GST:
 Certain item of almost every individual uses like
petroleum, electricity, real estates are excluded
under GST which is a greater disadvantage to
the common people, Services become expensive
like telecom, banking, airlines etc...
 Being a new tax it will take some time for the
people to understand it completely as some of
the sectors in the Indian economy are
unorganized
 FMGC products like shampoo, baby foods,
sanitary napkins, paints, detergents, skincare,
and Ayurveda medicine etc… prices have been
increased drastically.
 An increase in inflation might be seen initially. .
Impact of GST on Various Sectors
FMGC sector:
 FMGC companies have a mix of own
manufacturing plants; manufacture through
job workers Excise duty for most products is
on MRP basis with abatement.
 Job worker pays excise duty based on the
selling price of the principal manufacture.
 No VAT on job worker as the activity is
manufacture.
 FMCG sector has a long supply chain
involving manufactures –depots-wholesale
distributor-sub distributor-dealer-retailer.
Vol. 5 Iss. 1 Year. 2018
 Major business decisions will have to take in
the context of dealer/ C&F/depots/job
workers.
 GST would initiate a leaner supply chain.
 Huge cost saving on account of savings in
inventory cost insurance, transport, rentals,
security, employee costs local compliance,
etc.,
 Savings on account of elimination of
cascading effects of VAT on excise duty;
elimination of entry tax and octroi;
elimination of CST cost.
Readymade garments:
 GST as against exemption from excise duty.
 Complex chain of manufacture with multiple
job workers working in sequence.
 GST rate has been fixed at 12% for above
1000 whereas VAT rates are 5-6% &7-7.5&
for garments above 1000 before GST.
 Inter- state supply would involve savings in
cost since CST would be eliminated and
IGST would qualify for credit.
Auto component sector:
 Significant inter-state sale
 CST charged has been a cost to customer
and a factor in price negotiation.
Int. Jour. Sci. Tech. Huma , 67-72| 70
  Better pricing due to availability of credit
for the buyer.
 The components which are taxed at 19%
constitute about 30% of total auto
components made in India rests are at 28%.
So, we have a hike in prices of cars and
bikes.
 Increased credit on services due to
elimination of the concept of manufacture.
Retail sector:
 ED (excise duty) which is cost and forming
part of the purchase price would be
eliminated.
 Savings on account of elimination of
cascading effect of VAT, CST and ED.
 Taxes on gifts and promotional items.
 Possibility of cost savings on account of
credit in respect of other purchases by a
retailer subject to legislation.
 Impact on e-commerce.
Manufacturing sector:
 Removal of multiple valuations will create
simplification. Better pricing due to
availability of credit for the buyer.
 It contributes 16% to countries GDP.
 Cost savings on account of business reviews.
 Cash outflows on account of transactions
coming into the tax net (job work).
Banking, financial services and insurance:
 Better credit across goods and services.
 Increase in credit pool due to availability of
GST credits on purchase of goods.
 Interest on loans expected to be taxed under
GST.
Industry and trade:
 GST will not be levied on the goods and
services which would be exported from
India, the export oriented businesses like
the textiles, beverages, industrial machinery
Vol. 5 Iss. 1 Year. 2018
for food and textile and transport
equipment sectors will benefit.
 It is a competitive advantage if it
understands GST tax structure.
 If the transaction is with the state, then if
both the branches have the same business
identification number (BIN) then the
transaction would be free else it would be
charged.
 If GST is rolled out, new accounting and Tax
software’s should be developed and
updated.
Education sector:
 In India education is provided by both
public and private. Services provided by the
schools and colleges are not taxed the same
is expected to continue even after the
implementation of GST.
Conclusion
Finally, it can be concluded that the
implementation of GST useful for the eradication of
multiple taxes, remove the problems and issues in
an economy, enhance the efficiency of distribution
and manufacturing activities, widen the tax basis for
promotion of more revenue as a result decrease the
decrease in fiscal deficit, hence economy will move
from the developing countries to the developed
countries.
All sectors of economy whether the
industry, business including Govt. departments and
service sector shall have to bear impact of GST. All
sections of economy viz., big, medium, small scale
units, intermediaries, importers, exporters, traders,
professionals and consumers shall be directly
affected by GST... One of the biggest taxation
reforms in India the Goods and Service Tax (GST) is
all set to integrate State economies and boost
overall growth. GST will create a single, unified
Indian market to make the economy stronger.
Under GST, the taxation burden will be divided
equitably between manufacturing and services,
through a lower tax rate by increasing the tax base
and minimizing exemptions.
Int. Jour. Sci. Tech. Huma , 67-72| 71
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