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Notes for Class 11 business studies
Chapter 9 INTERNAL TRADE
Trade means buying and selling of goods and services for a profit
...
Internal Trade
Trade which takes place within a country is called internal trade
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In such type of trade both buyer and seller belongs to the same country
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In internal trade, trader can use any mode of transport for carrying the goods
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Wholesale Trade
2
...
Wholesaler acts as a connecting links between the producer and the retailer
...
The main role of a wholesaler is breaking the bulk, i
...
buying goods in large quantities and selling them in
small quantities
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2- Breaking the bulk
They purchase goods in large quantity and repack them in small packet for easy delivery to retailers
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3- Transporting
Wholesalers firstly moves the goods from the producer to his godown and secondly from there to the retail
shop
...
4- Risk Bearing
Wholesalers assume the risk arising out of change in demand, spoilage, destruction of goods by fire, theft etc
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5- Financing
Wholesalers provide finance to both manufactures and retailers
...
6- Market Information
They collect information about market conditions from retailers and pass it to the producers
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7- Pricing
The wholesaler fixes the prices of the goods he deal in, and based on this, the retailer determines the consumer
price
...
This is called grading
...
Services to manufactures (Producers)
1- Provide Ready Market
They provide ready market to the goods of manufactures by placing bulk orders
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In the absence of the wholesaler, the producer has to deal with numerous retailers
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3- Provide storage facility
Producers do not have to make arrangements for warehousing because goods are lifted by wholesalers
immediately after they are produced
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4- Provide finance
Wholesalers make ready payment and sometimes even advance payment to the manufacturer
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5- Economics of scale
A wholesaler buys goods in bulk and thereby enables the manufacturer to carry on large scale production
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6- Market Information
Wholesaler collects information regarding tastes and fashion of consumers from the retailers and passes it on
to the producers
...
Services to Retailers:
The wholesalers render the following services to retailers
...
As a result, retailers can carry on a large volume of business even with a small amount of working capital
...
Hence there is no need for the retailers to keep goods in their own warehouse
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This reduces the risk of retailers
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5- Sources of ready supply
A wholesaler is always well stocked with different types of goods
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6- Information about new product
A wholesaler is in constant touch with producers
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He passes on such information to retailers
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It means sale of goods in small lots to the final consumer
...
He serves as a link between the wholesalers and ultimate consumers
...
Retailer being directly and intimately in touch with the consumers he is the last link in the chain of
distribution
...
Functions of Retailers
A retailer performs a number of important marketing functions
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2- Convenient Location
Retailers locate their business in convenient places, generally nearest to the residential areas
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3- Personal Selling
Sales promotion is most effective through retailers
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4- Provide market information
Retailers are in direct personal touch with consumers, they are in a position to give correct market information
to wholesalers and manufactures
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6- Risk bearing
Even though the retailer supplies goods in small quantities, he has to bear the risk of loss due to change in
fashion, price, theft, fire etc
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7- Personal and after sales service
Sometimes retailers provide free home delivery to attract consumers
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shall also be offered by retailers
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1
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Services to Consumers
Service to Manufactures/ Wholesalers
1- Ready market
Retailers provide a ready market for goods at wholesalers and manufactures
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2- Popularized new products
They popularize new products through wind display, personal selling, exhibition etc
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4- Sales promotion
Sales promotion measures like free gifts coupons etc
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Retailers can easily influence the buyer to purchase a particular product
...
2- Selection of goods
The retailer has a large variety of goods according to the taste and fashion of consumers
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4- Freedom to buy small quantities
The retailers facilitate the customers to buy goods small quantities according to their requirements and ability
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6- Provide choice
Retailers keep different verities of goods of different producers
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Difference between Wholesalers and Retailers
Basis of Difference
Wholesaler
Retailer
1
...
Amount of capital
High capital is required
Comparatively less capital is
required
3
...
Source of supply
Manufacturer
Wholesaler
5
...
Specialisation
Specialisation in one or two
lines of goods
No such specialization
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Location
Location of business is not
Important
Location of business is important,
usually in residential areas
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Dealing in goods
Deals in large quantities
Goods are purchased and sold in
small quantities
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Area covered
Large area covered
Relatively small area-local market
Classification of Retailers
Retailers can be broadly classified into two
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Itinerant Traders
2
...
They do not have fixed shops
...
Their special feature is simple and easy formation, low investment and personal touch with business
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(a) Hawkers and peddlers
Hawkers and peddlers are the oldest form of retailers
...
Hawkers carry goods on vehicles while peddlers on their backs or heads moving from place to place to sell
their merchandise/products at the door steps of the consumers
...
As these traders reach the consumers themselves, so it is very convenient for housewives and general public to
purchase goods from them
...
(b) Market traders
They are small retailers who open their shops at different places on fixed dates, such as every Saturday or
Sunday
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These traders may be dealing in one particular line of merchandise, say readymade garments, toys, crockery
etc
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(c) Street traders
Street traders are small retailers who are commonly found at places where huge floating population gathers
...
They sell goods like books, pens, readymade garments, magazines etc
...
They are different from market traders in the sense that they do not change their place of business so
frequently
...
These traders do not stick to a particular place of business
...
They deal in cheap consumer items the like fruits, vegetables, sweets, etc
...
Their main aim is to avail of the local opportunities
...
They maintain permanent establishment to sell their merchandise
...
Compared with itinerant traders, fixed shop retailers have greater resources and operate on a relatively large
scale
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Difference between Itinerant Traders and Fixed Shop Retailers
Itinerant Traders
Fixed Shop retailers
No fixed place of business
Fixed place of business
Small Scale
May be small or large scale
Move from place to place
They do not move from one place to another
Generally dealing in single line of product
Generally dealing in different line of products
Comparatively lower credibility in the mind of
customers
Greater credibility in the minds of consumers because
fixed shop retailers are in a position to provide greater
services like guarantees, repairs, spares etc
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(1) Fixed Shop Small Scale Retailers (2) Fixed Shop Large scale Retailers
Fixed Shop Small Scale Retailers
They operate on small capital at a fixed place
...
Most of the customer products are available at one shop
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Most of their customers are residents of the same locality
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Limited choice to the customers is the major drawbacks of general stores
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Medical stores, cloth stores, book shops, jewellery shops etc
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A textile shop, say, pulimootil silk house, deals in all types garments such as ladies wear, gents wear, kids
wear etc
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(c) Specialty shops
These types of stores becoming very popular in urban areas
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Shops dealing in children’s book or kids wear, men’s wear, college books etc
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Ex: Hello Kids-shop for kids, K
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These stalls are wooden shops, sometimes placed on tables or platforms having shelves and stands
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They sell goods like magazines, pens, bread, toys etc
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(e) Second hand Goods shop
These retailers deal in second hand or used goods such as books, furniture, car, cloths etc
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People who can’t afford to buy new articles, generally becomes their customers
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Such goods can’t be sold along with the goods which are produced according to the required specifications
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These goods are usually sold at discounted prices
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are the main advantages of small scale retail organisations
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The most common forms of large scale retailing are
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Departmental stores
2
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Mail order Houses
4
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Super Markets
6
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A departmental store is a combination of several stores under one roof and unified control
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There may be separate department for books, furniture, cloth, medicine, electronics etc
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‘ In departmental store the consumers are likely to
spend more time while making their shopping
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They are generally organized as Joint Stock Company
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Ex: Spencers in Chennai
Features
1
...
3
...
5
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These are generally located at a central place in the heart of a city
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A wide variety of products are available from one departmental store
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Each department deals only one line of product
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Books, furniture etc
...
It offers various services and facilities to the consumers like restaurant, travel and information bureau,
telephone booth etc
...
7
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Advantages of Departmental stores
1- Central location
It is generally established at the centre of the city, they attract large number of customers
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It saves their time, energy and money
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4- Consumer services
Free home delivery, restaurants, reading rooms, telephone booth etc
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5- Wide choice
Consumers can select products of their choice from large stock of different brands
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6- Mutual Advertisement
As all departments are under one roof there is economy in advertising
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8- Promotion of sales
They are in a position to spend considerable amount of money on advertising and other promotional activities, which
help in boosting their sales
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2- High prices
Due to high cost of operations, the prices charged by departmental stores are comparatively high
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increases the operating cost
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5- Lack of effective Control
As it works through a large number of departments it creates the problems of effective control and supervision
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These stores are identical in their appearance, sign boards and interior decoration
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Maveli stores, Bata shop, Usha sewing machines etc
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Branches of the shop are located throughout the nation
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The goods required by the branches are supplied by the head office
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Chain stores completely avoid middlemen
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Chain stores may be established by a manufacturer or by a merchant
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Bata shoe stores, McDonald etc
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It deals only one or two lines of product
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Each branch deals the same type of goods
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There is uniformity in shop design and lay out
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It has centralized management purchasing and pricing
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It’s aim is to eliminate middleman
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It works on the basis of cash and carry principle
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It has centralized buying and decentralized selling
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They enjoy the gain of large scale buying such as higher discount, lower rates, less transportation cost,
advertisement etc
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Hence there is no risk of bad debts
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will
help the store to operate at a low cost
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This creates public confidence
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Such inter – branch transfers help to avoid loss due to shortage or surplus of stock
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7- Better turnover
Multiple shop attain quick and better turn over by locating branches all over the country
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Disadvantages of chain stores
1- Absence of choice
As multiple shops deal in limited line of products, generally one brand, so they can’t offer choice
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This would affect the volume of sales of the shop
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4- Lack of flexibility
Chain shops are centrally controlled
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to exploit local needs
and opportunities
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It is centrally controlled and the branch Manager has little powers
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Difference between Departmental stores and multiple shops
Basis of
differences
Departmental stores
Multiple shops
1
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Location
Located at central place
Located at a number of places
3
...
Goods can be transferred from one branch to
another
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Pricing
Prices charged in a departmental store are
not fixed and uniform
...
5
...
They deal in products of only one
manufacturer
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Services
They provide various services to
customers like free home delivery to
goods, rest rooms, telephone etc
...
7
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in
no
8
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They attract
Customers
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Credit sales
Departmental stores usually credit
facilities to regular customers
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10
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It needs small size of shops
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Satisfaction
of needs
...
It meet only limited needs of the customers
because they del only limited line of products
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involved
There is
In chain store risk is low as unprofitable
branches can be closed or shifted to
some other locality
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There is generally no personal contact between the buyers and the sellers in this type of trading
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All information relevant to the products are described in the advertisement
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P
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(Value Payable Post)
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Thus, mail order business is shopping by post from the customers view point and ‘selling by post’ from the
sellers view point
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Customers may be asked to make full payment in advance
2
...
3
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Bank handed over the goods to the buyer only after he makes full
payment
...
2
...
4
...
The whole business is conducted by post
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It may be started at anywhere even at home
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It may be started with less capital
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It need to keep stock
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No middlemen are involved
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Limited Capital: –This type of business can be started with limited capital as it does not require huge
buildings, fixtures and fittings and stock of goods
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Convenience in buying:– Goods are available at the door steps of customer
...
3
...
4
...
5
...
It makes possible to fix a reasonable price or lower prices
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Wider scope:- Area of operating is very wide
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7
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Hence there is no
need for stocking large quantities of goods
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Heavy expenses on advertising: – Mail order business depends on advertisements
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2
...
3
...
4
...
5
...
6
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Credit facility is not available
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Unsuitable to illiterate class: – Mail order business is based on advertisement
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d) CONSUMERS CO-OPERATIVE STORES
Consumer’s co-operative store is a large scale retail organization owned, managed and controlled by
consumers themselves
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Consumer co-operative store deals all type of consumer goods of daily use such as grocery stationery, utensils
dress materials etc
...
The profit earned by them are utilized to declare bonus to members and strengthening the general reserve and
general welfare funds, or similar funds for social and educational benefits of the members
...
The capital for this store is raised by the issue of shares to its members
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Each member has single vote irrespective of the number of shares held by them
...
2- Limited Liability
The liabilities of members are limited to the capital contributed by them
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4- Democratic Management
It is managed by managing committee, who are the elected representatives of members
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5- Lower Price
It purchases goods in bulk from manufactures and whole sealers and sell them to members and others
...
Disadvantages of consumers co-operative stores
1- Limited Capital
The primary source of fund for a cooperative store is the money raised from members by issue of shares; it is
limited and generally insufficient
...
2- Lack of initiative
It is managed by people who work on honorary basis; there is lack of initiative and motivation amongst them
to work hard
...
4- Inefficient management
The cooperative stores are not managed by professional managers and may lead to its closure
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They are more attractive to consumers because of wide variety, low price, self-service and huge collection of
merchandise
...
Goods are kept on racks with clearly labelled price and quality tags in super markets
...
Hence they are also called “self-service store”
...
The customers move into the store to pick up goods of their requirements, bring them to the cash counter,
make payment and take home
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Features
1
...
3
...
5
...
They sell goods on cash basis only
...
They operated on the self service principles
...
Advantages of super markets
1- One roof, low cost
Super markets offer a wide variety of products at low cost under one roof
...
2- Wide Selection
Super markets keep wide variety of goods of different designs, colour etc
...
3- No bad debts
Sales are on cash basis, so there is no chance for bad debts
...
Buyer is free to take his decision
...
It save customer’s time and energy
...
The customers, therefore, do not get any personal attention at the time of their purchase
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This restricts the purchasing power of buyers from such markets
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This can be successful only in big towns
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It is not suitable for products which require personal selling
...
These are coin operated machines found very suitable in selling products like hot beverages, platform tickets,
soft drinks, newspapers etc
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It is useful techniques of selling low priced goods of standard quality and uniform size
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Vending machines are useful for selling pre-packed items of low priced products, with uniform size and
weight
...
As like ATM its working time is 24×7
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It is very convenient for both buyer and seller
...
Initial cost of the machine and its maintenance charges on regular basis and repair are quite high
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Consumers can’t see the product before buying
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Return of goods is impossible in case of vending machine
...
The GST Act was passed on 29th March 2017 in the Parliament of India and came into effect on 1st July
2017
...
It has replaced 17 indirect taxes (9 State-level taxes and 8 Central level taxes) and 23 cesses of the States and
Centres that existed earlier, including Central excise duty, Service tax, Value Added Tax (VAT), Luxury Tax,
etc
...
When GST was implemented, 1300 goods and 500 services were taken into consideration
...
Cascading effect means charging tax on tax
...
For example,
A company is manufacturing Good X at the cost of ₹1,000 on which it has to pay Excise Duty @ 10% to the Central
Government and VAT @ 12% to the State Government
...
Now, the manufacturer will sell the Good to the dealer at ₹1,100
...
Then the VAT paid by the dealer will be 12% of
₹1,300 (1,100 + 200) = ₹156
...
It can be seen that initially, Excise Duty is charged on the Good X, on which further VAT is levied
...
e
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GST avoids this cascading effect by charging tax only once
...
State Goods and Services Tax (SGST): GST levied by the State (including Union Territories with
legislatures) on the Intra-State supply of goods or services by the State
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In other terms, IGST is the total of CGST and SGST
...
Single Tax Structure: The basic aim of GST is to replace multiple taxes with a single tax and make the price of
goods or services uniform across the country
...
2
...
3
...
4
...
It means that when details
of inward supply filed in by the buyer match the details of outward supplies filed in by the supplier, then only Input
Tax Credit of purchased goods or services will be available to them
...
5
...
As the name suggests, the anti-profiteering measures prevent the companies from making excess profits
...
These provisions are efficiently managed and
administered by NAA (National Anti-Profiteering Authority)
...
Registration under GST: It is mandatory for an organization with an aggregate turnover exceeding ₹ 40 Lakhs in a
financial year to register under GST
...
Input Tax Credit Under GST
Input Tax is the GST charged on the goods or services supplied to a taxable person
...
e
...
In other words, it means to claim the credit of the GST paid by an individual or a firm on
the purchase of goods or services used as a raw material for manufacturing the finished goods or services
...
This availed credit can be set off against the GST payable by them on the supply of
goods or services to be made later
...
Therefore, the tax will be charged on the value added to the good or service only, which avoids
the cascading effect, i
...
, double taxation
...
e
...
Therefore, the
manufacturer can claim (90+130+150) ₹ 370 and will have to deposit only ₹ 230 (600-370) as tax
...
GST Rates: The States and Centres have mutually decided upon the GST rates levied on goods or services through
CGST, SGST, and IGST under the aegis of the GST Council
...
However, the rate of GST for exports
and supplies to the Special Economic Zones (SEZs) is 0%
...
Applicability of GST: The Goods and Services Tax applies to the whole country (India)
...
Consumption-Based Tax: Earlier, the taxes were based on the principle of origin-based taxation
...
As the tax is received by the consumer State, the losses
faced by Producer States are compensated by the Centre
...
Applicable on Supply of Goods and Services: Earlier, the taxes were charged on the basis of ‘tax on the
manufacture or sale of goods or on the provision of services; however, the Goods and Services Tax is charged on the
basis of Supply of Goods and Services
...
GST on Imports: The imports of goods and services come under IGST and is treated as Inter-State Supplies
...
6
...
Ways in which GST benefits and empowers citizens:
1
...
The ultimate result of this
change is expected to be an increase in the production level and development of the industries
...
No hidden taxes: As GST is replacing all indirect taxes with one tax, there are no chances of a hidden tax within
the invoice of the goods and services
...
3
...
The common interface of the GST portal brings synergy and efficiency to the
filing of taxes
...
However, GST merges both compliances and lowers the number of returns, ultimately reducing the time spent on
these compliances
...
Higher disposable income in hand: Disposable income is the money at hand left with the consumer after making
all expenses
...
5
...
But, the reduction in prices of goods and services, and tax burden has
increased the disposable income of the consumers giving them a wide choice while purchasing goods and services
...
Increased economic activity: Reduction in prices of goods and services, increase in disposable income of
consumers, and decrease in the price of goods and services is leading the consumers in performing economic
activities
...
More employment opportunities: With the implementation of GST, the manufacturing of goods has become
simplified, resulting in an increase in the number of manufacturers and industries
...
GST Council
The Goods and Service Tax Council is a constitutional body that advises the Indian Parliament
...
The Goods and Services Tax Council (GST Council) comprises:
According to the Article 279A of the amended Constitution, the GST Council comprises the following members:
Chairperson: Finance Minister
Vice Chairperson: He/she is chosen amongst the Ministers of State Government
...
Voting takes place when at least half of the members are assembled
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The decision is taken by a 75% majority
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