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

[2] Assistant Professor, Department of commerce and management Studies, KSHM Arts and Science College, Edathanattukara.
[1] ranjithkaratk@gmail.com, [2] prajikaratt@gmail.com

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 to think customer and to guide 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 dont 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.

To Cite This Article: 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 5, Oct-2017; Pages: 61-65
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
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 sale to the end customer.

There is one more term 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 at the next 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.
63. 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 5, Oct-2017 Pages: 61-65

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 GST 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 cent, 12 per cent, 18 per cent and 28 per cent. Some goods and services would be exempt. Precious metals like 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 of this study is to analyse the impact of GST on the buying behaviour of FMCG consumers.

Secondary objectives
To study the various factors influencing buying behaviour.
To know the consumer perception towards GST.
To analyse the Consumers knowledge level towards GST.
64. 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 5, Oct-2017 Pages: 61-65

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 through 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 consumers 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 is taken constant. . The analysis is presented in the following section.

Effect of GST on buying decisions

Opinion Frequency Percentages

Yes 35 70%
No 15 30%
Total 50 100

Table 1: GST and its effects on the buying decisions.

The study found that 80% of the respondents confirming that GST has no effect on the buying decision related 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 Frequency Percentages

Have Effect 10 20%
No Effect 40 80%
Total 50 100

Table 2: GST and its effect on the price of 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 higher 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 revealed that majority (85%) of the participants was aware that as a consumer they pay GST for most of the
purchase. Around 88 % of the consumers were aware that bills issued by the shopkeeper contains amount of tax levied for the relevant
products.
65. 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 5, Oct-2017 Pages: 61-65

Awareness about GST

Level of awareness Frequency Percentages

Yes 29 58%
No 11 42%
Total 50 100

Table 3: Response of consumers towards the awareness level.

The study found that the consumers got moderate level awareness about 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 since the level of awareness among the respondents are moderate.

References

1) Marketing management 13th edition Philip Kotler

2) Consumer behavior (10th edition) Michael Solomon
3) Olivola Christopher ( 2015) Taxes and Consumer Behaviour,
4) Jai-Ok Kim, Sandra Forsythe, Qingliang Gu, Sook Jae Moon, (2002), "Cross-cultural consumer values, needs and purchase behavior",
5) J.Enrique Bign, M.Isabel Snchezb, Javier Snchezc, and source: Tourism image, evaluation variables and after purchase behaviour: inter-relationship.
6) Yoram P. Wind, Robert J. Thomas, (1980) "Conceptual and Methodological Issues in Organisational Buying Behaviour".
7) Economic Times.