Home > GST Impact on Wholesale Market

GST Impact on Wholesale Market

A wholesaler in simple words, is a middleman between manufacturers and retailers. Currently, there is no mechanism to trace the tax liability on wholesalers, from the actual purchase of goods from manufacturers to the sale made successfully to retailers. This is because they operate without any commercial or business obligations, as most of their transactions are done in black, where no invoice is issued to the buyer, and eventually no entry is posted in the books for such sales either.

Lets examine what impact will GST have on Indian wholesale market-

1. Wholesalers acceptance towards GST

The bulk-buying nature of wholesalers allows them to bargain for lower prices from the manufacturer, and undercut the market to gain in volume which results in overall profit for them. Since this retailer-wholesaler dynamics allows manufacturers to achieve sales from those markets, where they are not able to handle direct retail sales and shipments – there is no stopping on the way wholesalers operate.

However, under the GST regime, every invoice pertaining to taxable supply has to be uploaded on GSTN’s common portal and has to be acknowledged by the buyer. Both wholesalers and retailers will now be unable to escape their tax liability. The only possibility for tax evasion would arise if the entire supply chain is outside the tax network and does not file a return under GST law, which is very unlikely. To avoid being boycotted by other businesses in the supply chain, come 1st July and many wholesalers will eventually move to the tax bracket.

2. De-stocking or Re-stocking, what will the Wholesalers choose?

Under GST Law, retailers can avail input tax credit on closing stock held before the implementation of GST. This however, is subjective to certain conditions such as, there should be a record of invoices that reflect tax levied on transactions to be able to claim tax credit. In most of the cases, the VAT / excise tax chain stops with the first stage dealers – wholesalers, and the tax is passed on to the retailers as additional cost. If this way of business operation continue post GST, retailers will be forced to pass on the tax cost to their customers, making their prices much less in comparison to other players in the market. This will lead to retailers across the chain having to de-stock the inventory during the transition phase, and again re-stock under the new GST regime. This business activity of retailers will have an adverse effort on the wholesalers who too will have to de-stock. If only the wholesalers become GST Compliant, sale through the hurricane akin to the demonetozation phase, this could all translate into a steep rise in demand for goods as a result of a widespread re-stocking of goods by wholesalers.

3. Will Direct Channels take over the Wholesale market?

From our above mentioned points, it is quite evident that wholesalers will have to transition to GST to sustain their business vertical. And, to come in their support will perhaps be the manufacturers they’re dealing with by reducing the cost of goods and increasing commissions , etc. But, to avoid so much chaos with the wholesalers, the manufacturers may also consider reaching out to direct channels for business, and if they in all probability do so then this step of theirs is sure to cause a major spike in company-owned-direct-outlets to carry forward the distribution of goods business activity.

4. The Wholesale Market will Revive

Good things happen to people, who wait! Considering the fact that post GST, there will be seamless availability of input tax credit across state boundaries, the supply chain will be more efficient. Manufacturers would like to expand their business to other home states as well through GST compliant wholesalers. And, wholesalers will make the most of the additional opportunity by generating more sales from existing retailers, while also serving more retailers in the same geography.

In ConclusionFor wholesalers, it is perceived that they will take about a quarter to adjust with the new tax norms. However, with their willingness to become GST compliant they are sure to experience more benefits in terms of revenue and overall growth.

Simplify your GST Return Filing & Invoicing with GreenGST

Leave a reply

*

Related Post

Smart and Secure GST Filing Software Online in India – GreenGST

GST India is a comprehensive tax on manufacturing, sale and consumption of goods and services at national level, under, which no distinction will be made between, goods and services for levying of tax. GST India has subsumed almost every indirect tax, levied on goods and services by the Central and State governments in India.

GST has a G2B portal for taxpayers, to access the GST System, seeking to file their GST returns. However that would not be the only way, for interacting with the GST India Services, as the taxpayer, pertaining to his preference of third party applications, for instance GreenGST, will be able to interact with the GST system, seamlessly, sans any hassle via desktop, mobile and other interfaces.

The Advent of GST has paved way for modern SAAS based software’s, to facilitate your tax filing management. Therefore, to handle the great number of invoices that will be uploaded and GST returns that will be filed, every single day, there arises a great need for reliable GST filing software that will chisel out your GST filing woes, all at once! This is where, innovative SAAS based GST Software, such as GreenGST, wade their way to decongest the scenario of GST filing in India.

GreenGST, a product by Moglix, is a one stop-solution for meeting all your GST compliance needs. We extend our expertise in commerce, manufacturing and supply chain to solve problems related to digitization of supply chain as well as making it GST Compliant. Green GST makes your GSTR filing seamless irrespective of whether you are the buyer or the seller.

GreenGST helps you in reporting, invoice creations, reconciliation and GST filing. Our system will not only keep you GST compliant but it also comes with a dashboard based on daily analytics. It will gently remind you five days prior to the deadlines, so that you can download the report on non-compliant vendors and be safe from the hassle of last minute rush.

GSTQuiz

Test your GST readiness with this fun and interactive checklist!