1. GST impact on food items: What Goods and Services Tax means for the kirana stores and grocery shops

GST impact on food items: What Goods and Services Tax means for the kirana stores and grocery shops

GST rollout, launch in India: Suppliers whose turnover is more than Rs 75 lakhs would be required to register and pay GST at par with large corporates.

Updated: July 2, 2017 12:24 PM
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Priyajit Ghosh, Partner, Indirect Tax, KPMG in India

GST rollout, launch in India: The historic GST rollout will take place from the Parliament at the midnight on June 30 amidst protests in different parts of the country. The event will be organised at the Central Hall of the Parliament which also hosted 50-year celebrations of India’s Independence.

GST is the buzz word almost everywhere in India – from large corporate houses to households. Our local shops are no exception. GST is heralded as perhaps the biggest tax reform of the century. The small businesses such as grocery shops, eating outlets, and service providers such as parlours, laundries, etc. are the immediate suppliers to the consumers and hence assume one of the most important roles from the GST touchpoint.

GST is the buzz word almost everywhere in India – from large corporate houses to households. Our local shops are no exception. GST is heralded as perhaps the biggest tax reform of the century. The small businesses such as grocery shops, eating outlets, and service providers such as parlours, laundries, etc. are the immediate suppliers to the consumers and hence assume one of the most important roles from the GST touchpoint.

The government has set a threshold of Rs 20 lakhs (Rs 10 lakhs for north eastern states), on an all India basis, below which the suppliers are not required to undertake registration, charge GST or undertake compliances. Unprocessed vegetables, fruits, milk, education, health service suppliers are not required to register and pay GST. This would provide relief to the vast majority of the agriculture-based suppliers and providers of basic services.

Where the turnover is less than Rs 75 lakhs, such businesses have the option to pay tax under a simplified scheme (called composition) and have to submit a simplified quarterly return besides an annual return. However, they have to generate invoices with requisite particulars and many of them may not be in a position to comply with this requirement. Further, electronic filing on the GST portal (GSTN) is the sole filing option under GST. This is likely to be a challenge for many such suppliers during a few months.

Also read: GST Timeline: A look at the 17-year journey of historic Goods and Service Tax

Suppliers whose turnover is more than Rs 75 lakhs would be required to register and pay GST at par with large corporates. They have to ‘file’ at least 37 returns. First return of sales by the 10th of the next month, second return a prefilled one that is to be validated by 15th, final one by 20th and finally an annual one. The time gap of five days is likely to pose a challenge for a couple of months before they setup infrastructure for timely filing. Besides the return, such suppliers would be required to submit an annual audit report.

The challenge would also be around uploading invoice level details at the GSTN for all supplies made to the businesses, larger grocers selling to the smaller ones. Further, the online matching of credit, which is similar to the income tax deducted at source (26AS) in concept is likely to result into a reconciliation exercise unfamiliar to most of the taxpayers. The compliances burden thus has taken a quantum leap as compared to single monthly return and annual return under the current regime.

While, this sounds cumbersome in the long run, the data captured at GSTN level would help to track down sellers who have been evading the payment of tax, by deploying desktop analytics. Secondly, as the filing is electronic and with the increased IT deployment and mobile penetration, online filing services are expected to be available at a reasonable price. Third, GST is removing the cascading effect of taxes. To illustrate, the grocery shops pay service tax on the telephone, insurance, the service providers pay VAT on furniture, equipment which is not allowed as credit to them resulting the tax paid by them being subject to another tax that is collected from the consumers. Under GST, they would be able to recover the GST paid leading to a reduction of tax paid on tax. Lastly, it would lead to a simplification and transparency in the tax administration.

The grocery shop owners and small service providers would need guidance to understand and comply with the law on an immediate basis. Even it if requires the help of the private players, the government could set up facilitation centres in each municipality to address queries and help service providers with their return filings.

The efficacy of GST, at least in the short to medium run, could depend upon how effectively the last leg in the supply chain, the traders and small service providers are on boarded to help ensure the benefits of GST reaches the masses.

  1. L
    l k
    Jun 30, 2017 at 2:03 pm
    After some time Indians will become experts in cheating GST.
    Reply
    1. BlackMoney India
      Jul 2, 2017 at 3:49 am
      Very true...that is the nature(cheating) of Indians but let us hope that government can keep up with the cheaters by plugging the holes. Government must start checking the income source details when someone spends any big ticket item... buys a house or builds a house or buys a flat screen tv
      Reply

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