Class 11 Internal Trade

Trade within a country: the services of wholesalers and retailers, itinerant and fixed shop retailers, departmental and chain stores, and how GST is charged.

Key ideas

Internal trade is buying and selling within one country; it is wholesale (large lots to retailers) or retail (small lots to final consumers).

Wholesalers help manufacturers by bulk buying, storage, finance, bearing risk and market advice, and help retailers with ready stock, credit and specialised knowledge.

Retailers help manufacturers by distributing goods and passing on market information, and help consumers with regular supply, choice, information, after-sales service and credit.

Itinerant retailers have no fixed shop: peddlers and hawkers, market traders, street traders and cheap jacks.

Fixed shop retailers range from general, speciality, single line and second-hand shops to large departmental stores and chain stores.

A departmental store sells many kinds of goods in separate departments under one roof; a chain store runs many similar shops in different places, with central buying and uniform prices.

GST is one destination-based tax on the supply of goods and services; input tax credit means tax is paid only on the value added at each stage.

Remember

Sale within a state

CGST + SGST, each half of the GST rate

Sale from one state to another

IGST at the full rate

Price after a margin

price paid × (1 + margin% ÷ 100)

Consumer’s price through two traders

maker’s price × (1 + w ÷ 100) × (1 + r ÷ 100)

GST paid with input tax credit

GST% of the sale price − GST% of the purchase price

Departmental vs chain store

one central place, wide variety vs many places, one line; services many vs few; credit vs cash

Watch out

Adding the two margins first (5% + 25% = 30%): the retailer’s margin is on the price he paid, not on the maker’s price.

Charging IGST on a sale within the state, or CGST and SGST on a sale to another state.

Charging GST on the whole sale price without taking credit for the GST already paid on purchases.

Worked example

A manufacturer sells a cooler to a wholesaler for ₹700. The wholesaler adds 5% and sells to a retailer in the same state; the retailer adds 25%. Suppose GST is 18%. (a) Find the retailer’s price before GST. (b) Find the CGST and SGST on the retailer’s sale. (c) Name two services the wholesaler gives the manufacturer.

Working: 700 × 1.05 × 1.25; half of 18%

Answer: (a) ₹918.75 (b) ₹82.69 each (c) e.g. bulk buying, storage, finance, market information