INTERNAL TRADE

INTRODUCTION
Internal trade, also known as domestic trade ,
is the exchange of domestic goods within the
boundaries of a country.
This may be sub-divided into two categories,
wholesale and retail.
 WHOLE SALE TRADE
Wholesaling is concerned with the activities of those persons or establishments which sell
to retailers and other merchants, or to industrial ,institutional and commercial users but
who do not sell in significant amount to ultimate consumers .Wholesalers serve as an
important link between manufactures and retailers they enable the producers not only to
reach large numbers of buyers spread over a wide geographical area through retailers ,but
also to perform a variety of functions in the process of distribution of goods and services
.They generally take the title of goods and bears the business risks by purchasing and
selling the goods in their own name . They purchase in bulk and sell in small lots of
retailers or industrial users They undertake various activities such as grading of products
packing into smaller lots ,storage ,transportation promotion of goods ,collection of
market information ,collection of small and scattered order of retailers and distribution
to them .They also relieve the retailers of maintaining large stock of articles and extend
credit facilities to them
SERVICES TO MANUFACTURERS
Major services are offered by wholesalers to producers of goods and services are
given as below
• Facilitating large scale production
Wholesalers collect small orders from a number of retailers and pass on the pool of
such order to the manfacturers and make purchase in bulk quantities . This
enables the producers to undertake production on a large scale and take
advantage of the economies of sale
Bearing risk : The wholesale merchants deal in goods in their own name, take
delivery of the goods and keep the goods purchased in large lots in their
warehouses .In the process ,they bear variety of risks such as the risk of fall in
prices , theft , pilferage ,spoilage ,fire etc . To that extent they relieve the
manfacturers from bearing these risk
Financial assistance : The wholesalers provide financial assistance to the
manufactures in the sense that they generally make cash payment for
the goods purchased by them . To that extent ,the manufacturers
need not block their capital in the stocks sometimes they also advance
money to the producers for bulk orders placed by them

Expert advice : As the wholesalers are in direct contact with the retailers
they are in a position to advice the manufactures about various aspects
including customer’s tastes and preferences , market conditions
preferred by the buyers. They serve as an important source of market
information on these and related aspects
⦿ Help in marketing function : The wholesalers take care of the
distribution of goods to number of retailers who, in turn sell
these goods to a large number of customers spread over a large
geographical area . This of the marketing activities and enable
them to concentrate on the production activity
⦿ Facilitate production continuity : The wholesalers facilitate
continuity of production activity throughout the year by
purchasing the goods as and when these are produced and
storing them till the time these are demanded by retailers or
consumers in the market
⦿ Storage : wholesalers take delivery of goods when these are
produced in factory and keep them in their
godowns/Warehouses . This reduces the burden of manufacturers
of providing for storage facilities for the finished products
SERVICES TO RETAILERS
⦿ Availability of goods : Retailers have to maintain adequate stock
of varied commodities so that they can offer variety to their
customers .The wholesalers make the products of various
manufacturers readily available to the retailers of the work of
collecting of goods from several producers and keeping big
inventory of the same
⦿ Marketing support : The wholesalers perform various marketing
functions and provide support to the retailers . They undertake
advertising and other sales promotional activities to induce
customers to purchase the goods the retailers are benefitted as
it helps them increasing the demand for various new products
⦿ Grant of credit : The wholesalers generally extend credit
facilities to their regular customers . This enables the retailers
to manage their business with relatively small amount of
working capital
⦿ Specialized knowledge : The wholesalers specialise in one line
of products and know the pulse of the market they pass on the
benefit of their specialized knowledge to the retailers . They
inform the retailers about the new products their uses quality,
prices etc . They may also advise them on the décor of the
retail outlet allocation of shelf space and demonstration of
certain products
⦿ Specialized knowledge : The wholesalers specialise in one line of
products and know the pulse of the market They pass on the benefit
of their specialized knowledge to the retailers about the new
products and their uses equality , prices etc . They may also advise
them on the décor of the retail outlet allocation of shelf space and
demonstration of certain products
⦿ Risk sharing : The wholesalers purchase in bulk and sell in relatively
small quantities to the retailers. Being able to purchase merchandise
in smaller quantities ,retailers are in a position to avoid the risk of
storage ,pilferage obsolescence ,reduction in prices and demand
fluctuations.
RETAIL
TRADE
 MEANING
Retail trade is the business activity
associated with the sale of goods to the
final consumer, the ultimate customer. The
retailer normally buys goods in large
quantities from the whole seller and sells
them in small quantities to the ultimate
consumers.
 WAYS OF SELLING
GOODS
1. personally 2. telephone 3. Vending
machines
SERVICES
OF
RETAILER
S
1. SERVICE TO MANUFACTURES AND WHOLESALERS
• HELPIN DISTRIBUTION
OF GOODS.
• PERSONAL SELLING.
• ENABLINGLARGE SCALE
OPERATIONS.
• COLLECTINGMARKET
INFORMATION.
• HELP IN PROMOTION.
2. SERVICES TO CONSUMERS
• REGULAR
AVAILABILITY
OF PRODUCTS
• NEW
PRODUCTS
INFORMATION.
• CONVENIENCE IN
BUYING.
• WIDE SELECTION.
• AFTER-SALES SERVICES
TYPES OF FIXED SHOP
RETAILERS
 THE TWO TYPES OF SHOP
RETAILERS ARE
• SMALL SHOP-KEEPERS:
• A store that sells smaller quantities of products or services to the
general public. A business that operates as a retail outlet will
typically buy goods directly from manufacturers or wholesale
suppliers at a volume discount and will then mark them up in
price for sale to end consumers.
• LARGE RETAILERS:
• Large scale retail trade is a type in which either single type of
goods or a variety of goods is made available to a large number of
consumers in a big shop under a single roof or may be made
available at the convenience of customers.
 SMALL SHOP RETAILERS
• GENERAL STORES:
• General stores are small shops located in
residential areas.
• The main features of general stores are
• (a) They have a large variety in each line of
product.
• (b) They provides free home delivery, credit
facility.
 SMALL SHOP RETAILERS
• SPECIALITY SHOPS:
• These stores deal in a particular type of product
under one product line only.
• The main features of specialty stores are
• (a) These stores are specialized in one product
only.
• (b) They keep all the brands of that product.
 SMALL SHOP RETAILERS
• STREET STALL HOLDERS:
• These shops are situated at street crossings, They
are also known as street stalls
• The main features of street shops are
• (a) These shops have a limited space.
• (b) These retailers display their goods on tables,
stands etc.
 SMALL SHOP RETAILERS
• SECOND-HAND GOODS SHOPS:
• These shops deal with second-hand goods or
used articles such as books.
• The main features of second- hand good shop
• (a) These shops sell used goods.
• (b) The goods are generally priced low because
these are used goods.
 LARGE SHOP RETAILERS
• DEPARTMENTAL STORES:
• A departmental store is a large retail
showroom having a number of
departments under one roof each
department specialized in one line
of product.
ADVANTAGES AND LIMITATIONS OF
DEPARTMENTAL STORES
• (i) Advantages
• (a) Convenient shopping
• (b) Central location
• (c) Economies of scale
• (d) Elimination of middleman
• (ii) Limitations
• (a) High operating cost
• (b) Lack of personal attention
• (c) High price
• (d) Not located in residential colonies
• (e) Huge capital
 LARGE SHOP RETAILERS
• MULTIPLE SHOPS:
• Multiple shops refer to a number of
identical retail shops located in
different parts of the city
 ADVANTAGES AND DISADVANTAGES
•
OF
(i) Advantages
MULTIPLE SHOPS
• (a) Economies of scale
• (b) Standardized products
• (c) Public confidence
• (d) Division of risk
• (e) No, bad debts
• (ii) Limitations
• (a) Limited variety
• (b) Lack of personal touch
• (c) Inflexibility
• (d) Divided attention
• (e) No facilities
INTERNAL TRADE
Difference between
department stores and
multiple stores
 1)LOCATION
• A department store is located at a
central place , where a large number
of customers can be attracted to it.
• The multiple stores are located at a
number of places for approaching a
large number of customers.
 2) Range of products
• Departmental stores aim at satisfying all the
needs of customers under one roof.
• As such they have to carry a variety of
products of different types.
• The multiple stores generally aim to satisfying
the requirements of customers relating to a
specified range of their products only.
 3) Services offered
• The department stores lay great
emphasis on providing maximum
service to their customers.
• Some of the services , provided by
them include alteration of garments ,
restaurant and so on
 4) Pricing
• The multiple shop chains sell goods at fixed
prices and maintain uniform pricing policies
for all the shops.
• The departmental stores ,do not have uniform
pricing policy for all the departments : Rather
they have to occasionally offer discounts on
certain products and varieties to clear their
stock.
 5)Class of customers
• The departmental stores cater to the needs of
relatively high income group of customers
who care more for the services provided
rather than the prices of the product.
• The multiple stores on the other hand cater to
different types of customers including those
belonging to the lower income groups, who
are interested in buying quality goods at
6)Credit facilities
•All sales in the multiple
shops are made strictly on
cash basis. In contrast the
departmental stores may
provide credit facilities to
some of their regular
 7)Flexibility
• As the department stores deal in a
wide variety of products they have
certain flexibility in respect of the
line of goods marketed.
• However, there is not much scope for
flexibility in the chain stores, which
 SUPERMARKET
<INTRODUCTION>

• A supermarket is a large retailing shop where goods are displayed in such a way that buyers select products for
themselves. Buyers collect their product off the shelves invariably in a trolley and get them billed by the counter clerk.

• The supermarket typically has aisles for meat, fresh produce, dairy, and baked goods. Shelf space is also reserved for
canned and packaged goods and for various non-food items such as kitchenware, household cleaners, pharmacy
products and pet supplies.
CHARACTERISTICS

• It operates on self service basis.

• Prices are comparatively lower.

• Centrally located in big premises.

• It offers large varieties of goods.

• The profit margin is lower.

• Customer service is minimum.

• Sales are not compelled.

• Needs huge capital to operate.

 ADVANTAGES

• Saving in labour cost due to self-service system.

• Supermarket has large turnover.
• Reasonable or low prices of goods.
• Low cost of operation.
• Freedom of selection.
• Shopping is very easy and quick.
• There is no risk of bad debts
• High degree of efficiency due to elimination of service.
• High margin of profit to organisers.
• Advantages of large scale operations.
LIMITATIONS

• Supermarket requires huge financial resources.

• It is normally situated at a long distance from the residential localities.
• There is lack of personal attention.
• Supermarket does not provide various services such as free home delivery, personal
guidance, credit facility and after sale service.
• It faces the problem of coordinating activities of various sections of the market.
• It requires large and extensive premises.
• Goods which require explanation by salesmen cannot be sold in such markets.
• Operating costs are higher.
• Supermarket service may not be suitable to villages and small towns.
• There is scope for mismanagement
 VENDING MACHINES
<INTRODUCTION>

• A vending machine is a new form of direct

retailing. It is a machine operated by coins or
tokens. The buyer inserts a coin or token in the
machine and receives a specific quantity of
product from the machine.
• They are used to sell pre-packed and low-cost
products of mass consumption e.g. soft drinks,
cigarettes, postage stamps, tickets etc.
• The latest development under this concept is
Automated Teller Machines (ATM) in the banking
sector. This machine has made it possible to
withdraw money any time without visiting any
bank.
 USES OF VENDING MACHINE

• SNACKS- Snack vending machines distribute candy bars, chips and other food items in break
rooms, hospitals and rest stops around the world.
• BEVERAGES- Beverage vending machines provide warm and cold beverages in a variety of sizes
and flavours.
• MOVIES- Consumers can rent a movie by simply visiting a movie rental vending machine. The
profit margin is lower.
• Consumer Goods- Consumer goods vending machines dispense a variety of goods including
electronic goods, household products and medicine.
• Fishing Bait- Vending machines allow bait shops to sell several types of worms, tackle and
minnows from refrigerated vending machines at all hours.
• ATM- You can withdraw and deposit money in bank at any time without visiting the bank.
 LIMITATIONS

• The customers cannot inspect the goods before buying.

• They are useful in selling goods which are edible in nature.

• Maintenance is needed from time to time.

• Fixed prices apply which is unfriendly for both the customer and the owner.

• There can be loss for the owner in case of technical fault or damage by any
customer.

• Initial investment to install the machine is quite high.

• Coins of exact shape and size are required to operate the vending machine.
GOODS AND
SERVICES TAX
The Government of India, following the credo of ‘ONE
NATION AND ONE TAX’ and wanting a unified market in
order to ensure the smooth flow of goods across the
country implemented the Goods and Services Tax (GST)
from July 1,2017.
What is GST?
GST is a comprehensive, multi-stage, destination-based
tax that will be levied on every value addition.

is one indirect tax for the entire country.

So, before Goods and Service Tax, the pattern of tax levy was as follows:
Multi-stage
There are multiple change-of-hands an item goes through along its supply
chain: from manufacture to final sale to the consumer.
Let us consider the following case:
● Purchase of raw materials
● Production or manufacture
● Warehousing of finished goods
● Sale to wholesaler
● Sale of the product to the retailer
● Sale to the end consumer

Goods and Services Tax is levied on

each of these stages which makes it a
multi-stage tax.
 Value Addition

The manufacturer who makes biscuits buys flour, sugar and other material. The value of
the inputs increases when the sugar and flour are mixed and baked into biscuits.

The manufacturer then sells the biscuits to the warehousing agent who packs large
quantities of biscuits and labels it. That is another addition of value after which the
warehouse sells it to the retailer.

The retailer packages the biscuits in smaller quantities and invests in the marketing of the
biscuits thus increasing its value.

GST is levied on these value additions i.e. the monetary value added at each stage to
achieve the final sale to the end customer.
Destination-Based
Consider goods manufactured in Maharashtra and are sold
to the final consumer in Karnataka. Since Goods & Service
Tax is levied at the point of consumption. So, the entire tax
revenue will go to Karnataka and not Maharashtra.
What are the taxes that GST
replaces?
The following is the list of indirect taxes in the pre-GST regime:

● Central Excise Duty

● Duties of Excise
● Additional Duties of Excise
● Additional Duties of Customs
● Special Additional Duty of Customs
● Cess
● State VAT
● Central Sales Tax
● Purchase Tax
● Luxury Tax
● Entertainment Tax
● Entry Tax
● Taxes on advertisements
● Taxes on lotteries, betting, and gambling

CGST, SGST, and IGST has replaced all the above taxes.
What are the components of GST?
There are 3 taxes applicable under this system: CGST, SGST & IGST.
● CGST: Collected by the Central Government on an intra-state sale (Eg:
transaction happening within Maharashtra)
● SGST: Collected by the State Government on an intra-state sale (Eg:
transaction happening within Maharashtra)
● IGST: Collected by the Central Government for inter-state sale (Eg:
Maharashtra to Tamil Nadu)
In most cases, the tax structure under the new regime will be as follows:
Illustration:
● Let us assume that a dealer in Gujarat had sold the goods to a dealer in
Punjab worth Rs. 50,000. The tax rate is 18% comprising of only IGST.
In such case, the dealer has to charge Rs. 9,000 as IGST. This revenue will
go to the Central Government.
● The same dealer sells goods to a consumer in Gujarat worth Rs.
50,000. The GST rate on the good is 12%. This rate comprises of
CGST at 6% and SGST at 6%.
The dealer has to collect Rs. 6,000 as Goods and Service Tax. Rs. 3,000 will
go to the Central Government and Rs. 3,000 will go to the Gujarat
government as the sale is within the state.
Journey of GST in India
The GST journey began in the year 2000 when a
committee was set up to draft law. It took 17 years
from then for the Law to evolve. In 2017 the GST Bill
was passed in the Lok Sabha and Rajya Sabha. On
1st July 2017 the GST Law came into force. *le gst in 2000
Difference between VAT and GST
 Advantages Of GST
● GST is a transparent tax and also reduce number of indirect taxes.
● GST will not be a cost to registered retailers therefore there will be no
hidden taxes and and the cost of doing business will be lower.
● Benefit people as prices will come down which in turn will help companies
as consumption will increase.
● In the GST system, when all the taxes are integrated, it would make
possible the taxation burden to be split equitably between manufacturing
and services.
● GST will also help to build a transparent and corruption free tax
administration.
● Presently, a tax is levied on when a finished product moves out from a
factory, which is paid by the manufacturer, and it is again levied at the
retail outlet when sold.
 Disadvantages Of GST
● The GST structure has been marketed well to portray it as a
simple concept but in reality, the understanding is complicated
and distortionary to fully exploit the expected benefits.
● Multiple tax rates and many complexities will result into tax
disputes and lead to more corruption.
● Various issues recognized are usage of internet, number of
return to be filed monthly, the final tax incidence on goods and
services.
● High confusion regarding the product classification and multiple
rates is a major concern.
● The food industry has criticized the levying of higher rates on
value-added manufactured goods and has asked for a simpler
regime.
● GST is a consumption tax and hence the disposable income of
consumer will go down.
 What changes has GST brought in?
In the pre-GST regime, every purchaser including the final
consumer paid tax on tax. This tax on tax is called Cascading Effect
of Taxes.
GST has removed this cascading effect as the tax is calculated
only on the value-addition at each stage of the transfer of
ownership.
This indirect tax system under GST has improved the collection of
taxes as well as boosted the development of Indian economy by
removing the indirect tax barriers between states and integrating the
country through a uniform tax rate.
 INTERNAL TRADE
Role of commerce and industry associations in promotion of internal trade
• The government of India has a Ministry of Commerce
and Industry and a Ministry of Finance to look after the
well being of its trade sector. But to lend a helping hand,
there are Indian chambers of commerce and industry that
have been set up. These are generally voluntary and not
for profit associations and chambers that work with the
government to strengthen internal trade in our
country.One such famous and esteemed Indian chambers
of commerce is the Federation of Indian Chambers of
Commerce & Industry (FICCI). Set up way back in 1927
it the oldest business organization in the country. It is a
not-for-profit organization and not a government
association. It provides a network for discussions and is a
meeting place for stalwarts of the industry and people
making the policies. FICCI also articulates and forwards
problems that the industry may be facing.
Role of Indian Chambers of
Commerce and industry

• These various Indian chambers of commerce are crucial

in the growth and the sustenance of the internal trade
industries. They cooperate with the central and state
government and other government agencies to remove
some of the barriers to trade. They even assist in the
policy-making to ensure that all interests are looked after.
Let us see a few of the very important functions these
Indian chambers of commerce have carried out.
Role of Indian Chambers of
Commerce
• 1] Inter-State TransportThere are a lot of logistics involved with the transport of goods across
state borders. These chambers of commerce assist in a few of these logistical issues, such as registration
of vehicles, e-way bills, transport policies, insurance requirements etc. In fact, some of these
associations also promote better transport facilities and champion the cause of new highways and
better infrastructure. FICCI is actually responsible for some major developments in the transport
infrastructure (highways, rails, ports etc) of India.
2] Taxes and LeviesThese Indian chambers of commerce are always consulted when it
comes to taxes, octroi, levies etc on goods entering a state. Such taxes are a major source of
income to the government and a very important factor of internal trade. For example when the
recent GST laws were being framed all these associations were a part of the discussion and the
framing procedures. FICCI and ASSOCHAM even held seminars and lectures and surveys to
educate the businessmen on GST procedures.Even in current discussions about expanding the
scope of GST, these organizations represent the voice of the industry and also voice there
collective complaints and concerns. They are the main source of communication between the
government and the individual businessmen.
3] Harmonisation of sales tax structure and value
added tax : The chambers of commerce and
industry play an important role in interacting with
government to harmonise the sales tax structure
in different states. The sales tax is an important
part of the state revenue. A rational structure of
the sales tax and its uniform rates across states
are important for promoting a balance in trade .
As per new policy of the government, the value
added tax is being levied in place of the sales tax
to remove the cascading effect of the sales tax
4]Help provided to Agro productsThese chambers of
commerce often interact with farming associations and
cooperatives. They help such societies market and sell
agricultural-based products. These associations will even provide
assistance in obtaining and streamlining government subsidies
afforded to such agro products. These federations play a very
important role in the promotion of such secondary agricultural
industries.
5] Labour LegislationThe government and the Indian
chambers of commerce are constantly having dialogues about the
labour laws of our country and the improvements that it needs.
Labour legislation is an extremely important factor in the trade
industries. Internal trade is a labour-intensive industry and
maintaining peace with the workforce is essential. So such
associations make sure that all parties have their say and the
government can accordingly make changes to the legislation if
necessary.
6]Excuse duty: Central excise is the chief source of
the government revenue levied across states by
the central government. The excise policy plays an
important role in pricing mechanism . The trade
associations need to interact with the government
to ensure streamlining of excise duties
7]Assistance with MetrologySuch federations help with forming laws related to weights and measures (metrology) as well. This is to ensure
that neither the trader nor the customer gets cheated in any way. They even ensure that all branded products have their copyright and no one is
infringing on it. Some federations like FICCI also take up the cause of proper labelling and instructions and warnings on the packaging.
• Promoting sound infrastructure:A sound
Infrastructure like road
,port,electricity,railways etc ., play a
catalytic role in promoting trade . The
chambers of commerce and industry
hold discussions with government
agencies for investment into these
projects