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written by | October 11, 2021

What Are the Effects of GST on Kirana Shop?

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GST, which stands for Goods and Service Tax, was introduced in 2017. The GST came into existence as the combination or merging of several taxes applied on the goods. These taxes include the sales tax, service tax, excise duty tax, etc. On the one hand, the GST on sale purchase reduced the overall hurdle and hassle of the trading market, whereas, on the other hand, it increased the percentage of charges applied over these goods. The high charges of GST ranged between 12 per cent to 18 per cent, which greatly affected the marketing strategies of a small scale businessman, including the Kirana Store, grocery stores and shopkeepers in rural areas.

Did you know?

Businesses with a turnover of ₹1.5 Crores can avail GST Composition Scheme, under which small traders and businesses pay a 1 per cent tax based on turnover.

What Is GST?

GST is a value-added tax introduced by the Government of India in 2017 over goods (including Kirana goods) that are under the service of selling, i.e., domestic consumption products. The GST is a tax that the consumer pays, and GST is applied to provide a single-rate tax all over the country. It combines several taxes, including the sales tax, service tax, excise duty tax, etc. There are many GST impacts on small traders, both positive and negative, which will discuss in the following sections.

GST Return for the Retailer

A GST return is legal documentation that requires a filing from every taxpayer. This document contains all the details of the purchase, sales, output GST applied over the sale, and input tax credit applied on the purchases. This GST return is applied over every GSTIN number. This documentation is carried out under the authorisation of Tax Administrative, and these authorities are liable to calculate the overall net tax liability of the taxpayer. However, businesses with more than a ₹5 Crore annual turnover can file the GST return taxation, and they are required to file two monthly returns and one annual return. Moreover, the detailing of the GST return is provided in the GST regime on the official website.

Also Read: Step by Step guide on acquiring Kirana Store Licenses

Effect of GST on Kirana Stores

The impact of GST on small traders is far more observable than that on the manufacturers or retailers. The basic circles affected greatly by the introduction of GST are the Kirana stores and the shopkeepers. GST is profitable in combining several taxes altogether, but these taxes have a high rate, ranging between 12% to 18%. That is a sort of tax burden on the small sellers and merchants. Moreover, when it comes to the GST return, it is a lot of paperwork and compiling of data, which is a stressful computation. The terms of technology are considered in GST, where the Kirana stores stick to the booklets or paper copies. However, the GST requires a digitalisation for the tax maintenance, which is quite uncomfortable for the shopkeepers or these Kirana stores. Moreover, the computation of the GST is quite typical, and the estimation and evaluation are generally time-consuming and requires a good hold over commerce and accounting. These are the several effects of GST on Kirana stores and other shopkeepers of small scale industries.

Positive Impacts of GST

The goods and service tax was applied to the small traders, grocery stores and Kirana stores by the year 2017, which had a great effect on the business and the marketing trade. Many people criticised the GST, but there was some positive impact on these shopkeepers, small traders and Kirana stores. Some of which are:

Logistic Cost

The GST is the combination of several taxes that led to the complete payment of all the taxes. The submission of taxes like entry tax, VAT, etc., had reduced the logistic cost (2-5%) to a great extent. This reduction in logistic cost has caused growth in demand for several goods, particularly non-branded and Kirana goods.

Supply Chain Management

With the application of GST on shop purchases, the manufacturers do not need to open a warehouse in every state for trading or other marketing purposes. This application of GST had greatly affected the efficiency of supply chain management. With improved supply chain management, the overall marketing and trading skills are improved and easier, quicker, and hassle-free.

Profitable Margin

Due to the application of GST on grocery items, indirect and logistic costs are reduced to a great extent. With the reduction of these costs, the final product of any good or product is reduced to a greater extent, i.e., these products are available at a cheap rate, which is beneficial for the manufacturers and consumers. With reduced prices, the demand for these goods has increased rapidly. Most specifically, the introduction of GST for small traders had a positive impact on their business, basically situated in rural areas.

Also Read: Effective Steps To Start A Grocery Store In India With Lowest Investment

Negative Impacts of GST

GST has several negative impacts on small traders, Kirana stores, shopkeepers, and even manufacturers. Some of the negative effects are:

Frequently Changing Rates

Before the introduction of GST, the companies were required to set up their different units in different states for trading purposes. However, this hassle was removed after GST, but the tax applied over the land already captured by these companies had to be paid for. Therefore, the consumption of land by these companies became useless after the introduction of GST.

Anti-Profiteering Issue

The translational credit causes the anti-profiteering issue and the frequency of the rapidly changing rates as the computation and determination of the profit margin are very weak when the rates fluctuate every day. Therefore, the GST on shop purchases introduced had greatly affected the profit margin for many shopkeepers and retailers.

Translational credit

In 2017, the GST was introduced among retailers, manufacturers, shopkeepers, grocery stores, Kirana stores, etc. The Council had provided a list of GST applied on more than 200 goods, which created chaos and immersive confusion among the service providers. This introduction of GST had led to a massive fluctuation in the rates on an everyday basis.

Conclusion

The GST has had both positive and negative impacts on the Kirana Store, grocery stores and several shopkeepers. In 2017, GST was applied to more than 200 goods, which was chaotic for the shopkeepers. Earlier, the shopkeeper used to pay several taxes whose overall evaluation used to be less than GST, whose percentage of charge ranged between 12 to 18 per cent. Moreover, GST on shop purchases required digitalisation and a monthly return, which greatly affected the trading strategies of several manufacturers and retailers. 

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FAQs

Q: What do you mean by GST return?

Ans:

The GST return for retailers is taxable documentation that the taxpayer must submit monthly and annually to give a proper record of sales, purchase tax payment, etc. The GST return is applicable over the business with an annual turnover of more than ₹5 crores.

Q: What is the negative impact of GST?

Ans:

GST for small traders had several negative impacts on the shopkeepers, retailers, merchants, etc. Due to GST implementation, there is a great fluctuation in the market rate frequently. Moreover, the translational credits are causing an anti-profiteering issue in the market.

Q: What is the Grocery GST rate?

Ans:

The grocery GST rate includes 5 per cent of GST over branded paneer, frozen vegetables, honey and fried Areca nuts. However, there is a 12% GST charge over Cheese, ghee, butter, and dry fruits. Though a 0% GST is charged over eggs, curd milk, unbranded paneer, rice, wheat and mostly on all daily consumed products

Q: What are the positive impacts of GST?

Ans:

The GST on groceries was introduced to remove the taxes applied to goods and services. With the introduction of GST, the logistic cost Is reduced, which has enhanced the efficiency of the supply chain management. Overall, the GST has improved the profitable range of marketers and manufacturers.

Q: What is GST?

Ans:

GST stands for goods and service tax, which combines or merges different taxes applied over the goods. In 2017, the Council of India introduced GST over more than 200 domestic consumption goods, and the GST for groceries has greatly affected the Kirana shops.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.