Impact of GST on Traders and Manufacturers in India

GST’s impact on traders and manufacturers in India includes elimination of cascading effect, composition scheme for small traders, consolidation of the erstwhile indirect tax laws, etc.
GST provided multiple benefits to the
manufacturers and traders. While overcoming the shortcomings of the erstwhile
indirect taxation regime, it streamlined the indirect taxes. However, GST
certainly has its own set of compliances. To ensure timely and accurate
compliances, WeP Digital provides a complete GST solution meeting all
the needs of the traders and manufacturers. Check it out now!
After
the implementation of GST in India
on 1st July 2017, the indirect tax underwent a drastic change. There was a
significant impact of GST on traders
and manufacturers in India. Things got streamlined as both the goods and
services got covered under a single law, unlike the erstwhile Service Tax Act
for services and VAT for goods. Let's understand the impact of GST on manufacturers and traders in India in detail.
What are the Impacts of GST?
Businesses
experienced multiple benefits of GST in
India. GST streamlined the entire indirect tax structure by consolidating
all the erstwhile indirect tax laws into one. Earlier, for manufacturing,
excise was applicable, whereas, for selling goods, VAT and CST were applicable.
When it came to services, the Service Tax Act was applicable. Problems arise
when a single transaction is classified as both supplies of goods and services.
This also led to multiple instances of double taxation due to cascading effect,
the lapse of credit, etc., thereby causing loss to the registered person. All
such difficulties were removed after the introduction of GST in India.
Impact of GST on Traders
Traders
are specifically people dealing in the purchase and sale of goods. More often
than not, service providers also get covered under the traders, which are
considered trading in services. GST law has simplified the indirect taxes for
traders. Following are the major impacts
of GST on the trading sector in India:
● Earlier, if the trader had to
sell goods within the state, he had to pay VAT, whereas, in the case of an
inter-state sale, CST was applicable. However, with GST, sales within the state
are liable to CGST and SGST, whereas, for sales outside the state, IGST became
applicable.
● For trading in services as well,
the concept remains the same. GST shall be levied based on whether the service
is provided within or outside the state.
● The cascading effect has been
removed. The ITC on inward supply of goods or services can be set off against
outward supply of goods and services. The only bar is that CGST cannot be set
off against SGST. As the ITC gets set off against output tax liability, there
is no cascading effect, thereby eliminating double taxation.
● For transporting goods with a value exceeding Rs. 50,000, the e-way bill shall be generated.
How Has GST Affected Small Traders?
GST
registration becomes mandatory if the turnover exceeds Rs. 20 lakhs during the
financial year. In case of an exclusive supply of goods, the limit applicable
shall be Rs. 40 lakhs. Therefore, small traders with turnover lower than the
above threshold limit shall not be required to undertake GST registration.
However, they can opt for voluntary registration under GST.
Further,
the GST law has a special scheme for small traders known as the composition
scheme. Under the composition scheme, the trader only needs to file CMP-08 on a
quarterly basis to discharge the tax liability on a self-assessed basis. After
the financial year ends, you need to file your GST return in Form GSTR-4 by 30th
April. You can opt for a composition scheme if your aggregate turnover does not
exceed Rs. 1.50 crores during the financial year.
Impact of GST on Manufacturing in India
Excise
law was the predominant indirect tax applicable for manufacturing in India.
However, after introducing the GST law, now GST shall be applicable. Following
is the impact of GST on the
manufacturing sector in India:
● While in the erstwhile excise
law, the point of taxation was the removal of goods, under GST, the point of
taxation is the supply of goods. The concept remains the same here: CGST and
SGST shall be levied for intra-state supplies, whereas IGST shall be levied for
inter-state supplies.
● There has been a significant
fall in the production costs as the manufacturers can avail of the ITC to
purchase raw materials used for the production and manufacturing of goods.
● A single registration is
required within the state for all the factories. However, registration was
required for each factory, which is now done away with.
● Earlier, due to applying
multiple laws like excise, VAT, CST, etc., the manufacturers had to solve
lengthy queries and assessments. With the introduction of GST, compliance has
become far easier for the manufacturers in India.
● However, most manufacturers ask
a pertinent question – Can manufacturers do trading in GST?
● The answer is Yes! GST
registration is taxpayer-wise and state-wise and not business or product-wise.
Therefore, a manufacturer can indulge in the trading of goods as well. There is
no bar under GST to continue only a particular activity based on which GST
registration was obtained.
How to Calculate GST on Manufacturers?
Calculating
GST on the manufacturer is simple. The GST shall be levied on the taxable value
of the goods or services or both. The rate of GST is based on the goods sold by
the manufacturer. Different goods attract different rates of GST and are
classified based on the HSN code.
How to Add Manufacturing to GST?
While
obtaining GST registration, you shall select the nature of your business
activity whereby multiple options are provided. You shall select manufacturing
from that. If you are already a registered person and want to select a
manufacturing activity, the GST portal allows you to select your core business
activity once you log in. You are provided with three options, i.e.,
Manufacturer, Trader, or Service Provider. You can select the manufacturer here.
Note for the client: The writer has clubbed
the information on e-invoice and e-bill here.
Benefits of WeP Digital GST Software for Manufacturers and Traders in
India
GST
compliances are not a one-time activity but an ongoing exercise around the
year. Therefore, most traders and manufacturers prefer GST software to ease
their compliances and ensure accuracy in furnishing GST data. However, they
often get confused as to which software should be selected?
WeP Digital GST software has been pioneering in helping traders and
manufacturers ease their GST compliances. Following are the benefits of WeP
Digital GST software:
● Experience 6000 invoices matching at once
● Takes care of all your monthly, quarterly, and
annual GST compliances
● 3 step return filing – Validate, Upload and
Save
● Comprehensive description for errors and quick
resolution
● Reconciliation and discrepancy resolution of
ITC at both summary level and supplier level
● MIS report generation
● 256-Bit data security
● E-way bill solution
● E-invoicing solution
● Various comparison report generation for
analysing and making informed decisions
Above
was just the tip of the iceberg you can experience with WeP Digital GST
Software. Non-compliance with GST can lead to a levy of penal charges and
interest. Therefore, it is important to ensure GST compliance in a timely and
accurate manner. Are you GST compliant?