GST launch: CRISIL says credit profiles of organised players to witness gradual recovery over the medium term
The Goods and Services Tax, one of the largest tax reforms in the Indian economy is set to roll out in a few hours. What does the GST hold for traders who have a license and are publicly registered for the various taxes currently in place? Global analytical company, CRISIL has finds that the upcoming tax will be advantageous for such organisations. The unorganised sector which comprises of the local kirana shops or small convenience stores may feel the heat but it will be good news for the large organised groups. The GST lets the manufacturers of almost all commodities to get some tax credit and the largescale operations of organised retailers will garner them plenty of margins. Small scale retail transactions are usually done through cash but large scale retailers, especially the jewellery chains can benefit from the tax reform. The following is GST’s Impact on the organised retail sector:
1. The Goods and Services Tax (GST) regime will provide a fillip to organised jewellery retailers by weaning business away from the unorganised players, who currently account for three-fourths of the industry’s annual revenue estimated by CRISIL at about Rs 2.85 lakh crore.
2. Besides GST, other measures such as ban on cash purchases of more than Rs 2 lakh per transaction, gold-on-loan and gold deposit schemes are also beneficial for organised retailers.
3. GST compliance is an effort-intensive process and will be more cost effective for the organised retailers because of their large scale of operations.
4. In addition, they operate largely from leased premises and under GST, they will benefit from set-off of tax paid on rent.
5. Because of the cascading nature of tax, the entire jewellery supply chain will come under the tax net, making it more traceable, which is advantageous to the organised retailers.