“IMPACT OF GOODS AND SERVICES TAX (GST) ON THE BUYING BEHAVIOUR OF FMCG CONSUMERS IN ALANALLOOR GRAMA PANCHAYATH, PALAKKAD (DT)”

IAETSD JOURNAL FOR ADVANCED RESEARCH IN APPLIED SCIENCES, VOLUME 4, ISSUE 5, OCT /2017 ISSN (ONLINE): 2394-8442

“IMPACT OF GOODS AND SERVICES TAX (GST) ON THE BUYING BEHAVIOUR OF FMCG CONSUMERS IN ALANALLOOR GRAMA PANCHAYATH, PALAKKAD (DT)” Ranjith karat [1] and Prajith Karat

[2]

[1] Assistant Professor,

Department Department of commerce and management Studies, Studies, KSHM Arts and Science College, Edathanattukara. Edathanattukara.

[2] Assistant Professor,

Department Department of commerce and management Studies, KSHM Arts and Science College, Edathanattukara. Edathanattukara. [1] [email protected] [2] [email protected],, [email protected]

ABSTRACT.

The Goods and Services Tax (GST) has become one of the most prominent topics discussed since its introduction in India. GST was effectively implemented in1st July 2017. Despite the mixed reviews received from the practitioners, general public and most important businesses. The new tax policy implemented has brought about changes in the country particularly in tax administration system and business transactions. Many times it has been observed that people may have difficulty in understanding the tax system as well as they have different perception on taxes on consumption. The implementation of Goods and Services Tax (GST) is expected to affect consumer behavior in India . Thus, this study examines the impacts of GST on the buying behavior of FMCG consumers, particularly in Alanalloor Gramapanchayath, Palakkad (DT).

Keywords: Goods and Services Tax (GST), consumer Behavior, FMCG INTRODUCTION Consumer behavior refers to the mental and emotional process and the observable behavior of consumers during searching, purchasing and post consumption of a product or service. Consumer behavior involves study of how people buy, what they buy, when they buy and why they buy. It blends the elements from psychology, sociology, socio psychology, anthropology and economics. It also tries to assess the influence on the consumer from groups such as family, friends, reference groups and society in general. Buyer behavior has two aspects: the final purchase activity visible to any observer and the detailed or short decision process that may involve the interplay of a number of complex variables not visible to anyone. Understanding the buying behavior of the target market for its company products is the essential task for the marketing department. The job of the marketers is t o “think customer and to guide g uide the company into developing offers, which are meaningful and attractive to target customers and creating solutions that deliver satisfaction to the customers, profits to customer and benefits to the stakeholders. Possibly the most challenging concept in marketing deals with understanding why buyers do What they do (or don’t do). But such knowledge is critical for marketers since wanting a strong understanding of buyer behavior will help shed light on what is important to the customer and also suggest the important influences on customer decision-making.

Ranjith karat and Prajith Karat,. IMPACT OF GOODS AND SERVICES TAX (GST) ON THE BUYING BEHAVIOUR OF FMCG CONSUMERS IN ALANALLOOR GRAMA PANCHAYATH, PALAKKAD (DT).Journal for Advanced Research in Applied Sciences. Volume 4, Issue Issue 5, Oct-2017; Pages: 61-65 To Cite This Article:

62. Ranjith karat and Prajith Karat,. IMPACT OF GOODS AND SERVICES TAX (GST) ON THE BUYING BEHAVIOUR OF FMCG CONSUMERS IN ALANALLOOR GRAMA PANCHAYATH, PALAKKAD (DT). Journal (DT). Journal for Advanced Research in Applied Sciences. Volume 4, Issue 5, Oct-2017 Pages: 61-65

FIG.1 Buying Decision The Goods and Services Tax (GST) was launched in 1st of July2017, and it is set to revolutionize the way we do our taxes. Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition. To understand this, we need to understand the concepts under this definition. Let us start with the term ‘Multi-stage’. Now, there are multiple steps an item goes through from manufacture or production to the final sale. Buying of raw materials is the first stage. The second stage is production or manufacture. Then, there is the warehousing of materials. Next, comes the sale of the product to the retailer. And in the final stage, the retailer sells you – the end consumer – the product, completing its life cycle. Goods and Services Tax will be levied on each of these stages, which make it a multi-stage tax. GST will be levied on these value additions – the monetary worth added at each stage to achieve the final final sale to the end customer. There is one more term te rm we need to talk about in the definition – Destination-Based. Goods and Services Tax will be levied on all transactions happening during the entire manufacturing chain. Earlier, when a product was manufactured, the centre would levy an Excise Duty on the manufacture, and then the state will add a VAT tax when the item is sold to the next stage in the cycle. Then there would be a VAT VAT at the next point point of sale.

FIG.2 Goods and Service Tax at a glance. FMCG sector in India

Fast Moving Consumer Goods (FMCG), includes the products that are sold quickly and generally consumed at a regular basis as opposed to durable goods such as kitchen appliances that are replaced over a period of years. The sector primarily engages in the production, distribution and marketing operations of FMCG. FMCG product categories comprise of food and dairy products, pharmaceuticals, consumer electronics, packaged food products, household products, drinks and others. This sector is characterized by products having low unit value and requiring frequent purchases and consumer behavior reflecting less loyalty, impulse buying, and low involvement on the part of a consumer (Kotler). The fast moving consumer goods (FMCGs) segment is the fourth largest sector in the Indian economy. The market size of FMCG in India is estimated to grow from US$ 30 billion in 2011 to US$ 74 billion in 2018.Food products is the leading segment, accounting for 43 % of the overall market. Personal care (22 %) and fabric care (12 %) come next in terms of market share.


According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan UniLever. Growing awareness, easier access, and changing lifestyles have been the key growth drivers for the sector. Working of the the GST System System

GST is a destination-based tax, as against the present principle of origin based taxation. The new tax regime follows a multi-stage collection mechanism wherein tax is collected at every stage and the credit of tax paid (input tax credit) at the previous stage is available as a set-off at the next stage of transaction. This helps to eliminate "tax on tax" or the cascading impact of tax. GST shifts the tax incidence near to the consumer and benefits the industry through better cash flows and better working capital management. From consumer point of view, GST helps to bring down overall tax. GST rates on goods and services have been broadly classified into four tax rates: 5 per cen t, 12 per cent, 18 per cent and 28 per cent. Some goods and services would be exempt. Precious metals li ke gold will attract a separate tax rate of 3 per cent. A cess will be levied over the peak rate of 28 per cent on specified luxury and sin goods. Under GST, businesses are required to file returns each month. But the government has let companies file late returns for the first two months so that they can adapt to a new online filing system. Tax rates GST for FMCG

PROBLEM STATEMENT The present study entitled “a study on the impact of goods and services tax on the buying behaviour of FMCG consumers in alanalloor grama panchayath, palakkad (dt)” is focussing on analysing what is the real impact of GST on the buying behaviour of FMCG consumers.

OBJECTIVES OF THE STUDY Primary objective 

The main objective objective of this study study is to analyse the impact of GST GST on the buying behaviour behaviour of FMCG FMCG consumers. consumers.

Secondary objectives   

To study the various factors influencing influencing buying behaviour. behaviour. To know the consumer perception perception towards GST. GST. To analyse the Consumers Consumers knowledge knowledge level towards towards GST.


RESEARACH METHODOLOGY

Here, for this study descriptive research method is used. The term descriptive research refers to the type of research question, design, and data analysis that will be applied to a given topic. Research methodology underlines the various steps involved by the researcher in systematically solving the problem with the objective of determining various facts. The universe for the study mainly comprised of its consumers of FMCG products In Alanalloor Panchayath. Total 50 consumers were selected as sample size for the study. Total of 50 FMCG consumers were taken as sample frame. Convenient non-probability sampling method is used to collect data for the study. The data for the study were collected from primary and secondary sources. The study mainly depends on secondary data collected thr ough Structured Questionnaire and personal interview.

RESULTS AND DISCUSSIONS. Buying decisions are generally affected by the price of the product, preferences for the product. Imposition of tax on a commodity generally increases the price of the products and may affect the consumer’s decision to buy or to postpone the purchase. FMCG are the product which are required on regular basis and involve habitual decision making has little to do with the system of tax collection when effect of such tax on price price is taken constant. constant. . The analysis is presented in the following section. Effect of GST on buying decisions

Opinion Yes No Total

Frequency 35 15 50

Percentages 70% 30% 100

Table 1: GST and and its effects on on the buying decisions. decisions. The study found that 80% of the respondents confirming that GST has no effect on the buying decision rela ted to FMCG products 65% respondents opinioned that GST could potentially support volume growth for certain products, particularly in the rural segment due to change in tax slab. Effect of GST on the Price of widely consumed products.

Opinion Have Effect No Effect Total

Frequency 10 40 50


Table 2: GST and and its effect on the the price of widely widely consumed products. Surprisingly, 70 % of the respondents opinioned that there is a slight increase in the price of the widely consumed products since these are placed under the highest tax slab of 28%. 45% opinioned that higher tax rate for detergents and shampoo is a real dampener since these are daily-use, mass consumption items. Manufacturers will have to pass on the h igher tax incidence to consumers in the form of higher prices of these goods. The study also found that most of the items belonging to the premium category have been put under the highest tax slab of 28%. These include health supplements, skin care, aerated drinks and liquid soap, among other goods. But this is not going to have a particularly negative impact on consumers as they had been paying similar taxes earlier. The increase, in some cases, is only marginal. For most other FMCG majors, the GST rate structure is likely to be neutral or marginally positive, as their broad portfolios would see a mixed impact. The analysis also also revealed that majority majority (85%) of the participants participants was aware aware that as a consumer consumer they pay GST for most of the the purchase. Around 88 % of the consumers were aware that bills issued by the shopkeeper contains amount of tax levied for the relevant products.


Awareness about about GST

Level of awareness Yes No Total

Frequency 29 11 50


Table 3: Response Response of consumers consumers towards the awareness level. The study found found that the consumers consumers got moderate level awareness awareness about GST. GST.

CONCLUSIONS There is a positive relationship between price and consumer buying behavior (suitable price make consumers more willing to purchase items). Imposition of taxes may affect the price of the goods which influence the buying behavior of consumers. The introduction of GST in India resulted in the replacement of existing regime. The study found that the introduction of GST has no effect on the buying decision of FMCG consumers in alanalloor grama panchayath even though there is a slight variation in the price of FMCG. The study also reveals that certain FMCG products have potential growth volume due to changes in the tax slab especially in rural areas. The consumption level of the FMCG consumers was not affected by the GST especially in the case of widely consumed products. The government authority has taken initiative to provide guidelines to both traders and consumers with regard to the working of GST GST since the level of awareness among the respondents respondents are moderate.

References 1) 2) 3) 4) 5) 6) 7)

Marketing management 13th edition –Philip Kotler Consumer behavior (10th edition) –Michael Solomon Olivola Christopher Christopher ( 2015) “Taxes and Consumer Consumer Behaviour”, Jai-Ok Kim, Sandra Forsythe, Qingliang Gu, Sook Jae Moon, (2002), "Cross-cultural consumer values, needs and purchase behavior", J.Enrique Bigné, M.Isabel Sánchezb, Sánchezb, Javier Sánchezc, Sánchezc, and source: Tourism image, evaluation variables and after purchase behaviour: inter-relationship. Yoram P. Wind, Wind, Robert J. Thomas, Thomas, (1980) "Conceptual and Methodological Issues in Organisational Organisational Buying Behaviour". Economic Times.

“IMPACT OF GOODS AND SERVICES TAX (GST) ON THE BUYING BEHAVIOUR OF FMCG CONSUMERS IN ALANALLOOR GRAMA PANCHAYATH, PALAKKAD (DT)”

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