Impact of VAT on retail industry
impact of VAT on retail industry: The UAE is set to introduce VAT from January 01 2018. The extensive changes reflect throughout the UAE by the introduction of VAT, mainly on retail industry. If the retailers want to be competitive they have to provide best products and offers without considering high profit margins which are not genuine in the present economic climate. This means they have to adjust the profit margins and re-evaluate business models.
Retailers, to understand how the impact of VAT introduction will affect the demand for their product by undertaking detailed analysis of price modeling on their large volume of stock items. This will help retailers to reach the conclusion how much, if any, of the cost of VAT they may be able to impose on consumers.
The retailers those who exceed the VAT registration threshold need to account for VAT on their sales. So they are able to collect VAT from the consumers and pay the net amount of VAT to the Authorities of Taxation. The “net amount of VAT” referred is the amount after deducting the VAT the retailers pay to other businesses which is related to accompanying the business to make tax supplies. There is a slight difference in ‘account for VAT’ and charging VAT on sales. Accounting for VAT is the responsibility of the supplier of goods and services not of the consumer or purchaser. It depends on the decision of supplier to recover the amount of VAT from the consumer and the supplier decision depends on its current marketplace.
The prices of retail goods sold to final customers will be inclusive of VAT, that means VAT included price is advertised to the consumers. As per the studies VAT will enhance the retail industry in the UAE. In the initial stage the consumers will be hesitant but they will get used to it.