What is the opinion of the Retailer and Wholesaler Community on the GST roll out ? Will it upset the tables for them? We find out….
Summary
GST is a major reform of the Indian Taxation System. Although it may prove to be advantageous in the long run, it is possible that it may affect the business and stability. The Aim of the project is to understand what do FMCG Retailers and Wholesalers think about GST and its effect on their business. Secondary as well as Primary research was conducted to find out what Retailers and Wholesalers think about GST and aspects related to that.
100 Retailers and Wholesalers were selected at random from across the country and were interviewed with the help of a preset questionnaire having multiple choice as well as open ended questions. All the responses were collated and thoroughly analyzed. Some of the factors like sampling error, judgment error, respondents not willing to give proper information, etc. might have influenced the findings
Objective of the Study: The main objective to conduct this research is to understand the impact of GST on Retailers and Wholesalers operating in FMCG Sector.
Research Scope: This research has been conducted to get an idea of how GST is going to affect Retailers and Wholesalers. This study can help FMCG Companies to understand the problems and needs of Retailers and Wholesalers in GST implementation.
Research Methodology:
Secondary Research was done to understand the factors that can affect the business in FMCG Sector. A questionnaire of 15 questions was used to gauge the awareness of GST amongst Retailers and Wholesalers in FMCG Sector. 100 Retailers/ Wholesalers were interviewed
The questionnaire was implemented through a 1-o-1 interview with each of the respondents. Each interview was of 30 mins. Conclusion has been drawn after analysis of combined responses.
Analysis:
- There is awareness about GST among retailers and wholesalers but there is no clarity around the rules.
- Most of the retailers and wholesalers still need to upgrade their IT Infrastructure for successful implementation of GST.
- Tax bracket decided by the government have left some retailers and wholesalers dissatisfied
- Demonetization affected retailers and wholesalers badly, Now, GST is expected to leave a negative effect initially
- Some of the retailers and wholesalers upgraded IT Infrastructure during and after demonetization and hence they have been able to handle the requirements of GST
- GST may result in decline of margins of retailers and wholesalers.
- Post GST implementation, sales may go down either temporarily or for a long time which might send businesses to closure
- Reduction in free gifts will not have any direct impact on sales and margins of retailers and wholesalers.
- GST will bring benefits with it which in the long run should turn fruitful for FMCG Sector
Recommendations:
- Government and FMCG Companies should find a way to help the Retailers and Wholesalers in understanding the rules to implement GST.
- FMCG Companies should guide the Retailers and Wholesalers on how they can easily upgrade their IT Infrastructure. This can be done by way of cloud based videos.
- FMCG Companies should come up with a strategy to motivate retailers to sell products in the higher tax bracket.
- FMCG Companies should help Retailers and Wholesalers by way of promotional activities.
- More discounts should be given to Retailers and Wholesalers for the products which fall in higher tax brackets.
- FMCG Companies should increase the credit time for the payment of products.
- Cash discounts should replace free gifts.
Key Findings:
| Awareness about GST | 95 % respondents are aware about GST |
| IT infrastructure required for GST | 42 % of respondents do not have required infrastructure for GST |
| Tax brackets decided by the government for the products | 51% of respondents are not satisfied with tax brackets decided by Government |
| Timing of the GST implementation | 42% of respondents think that GST should have been implemented later |
| Impact of GST on margins of wholesalers and retailers | 38% of respondents feel that GST will not impact margins. While, around 40% feel that it will have a long term impact on margins and margins will get down |
| Impact of GST on sales of products | 60% of respondents think that sales will temporarily go down. While, 11% feel that sales will be low for a long time and business will be affected |
| Help required by retailers and wholesalers from FMCG Companies | FMCG Companies should help in developing IT infrastructureFMCG Companies should be more flexible with returnsFMCG Companies should help in inventory management |
| Single most concern regarding GST | According to most of retailers and wholesalers, the single most concern regarding GST is that there is no clarity around the rules |
| Impact of reduction in free gifts | 50% of respondents think that there will not be any impact of reduction in free gifts |
| Changes brought by retailers and wholesalers after demonetization | 50% of respondents have not brought any change after demonetization. While, 45% say that they have started accepting digital payments |
| Benefits of GST | Reduction in black market, transparency in system, systematic way of doing business, increase in opportunities due to single tax across the country are some of the perceived benefits of GST |
Click Here to have a look at the detailed findings from the research
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