Internal Trade Class 11 Notes

The unit opens with the definition of the trade it is about, and the definition has to be set against the international trade, because the two are distinguished by the frontier, and the two types within the internal trade are the wholesale and the retail, which are also the two links of the chain.

• Internal trade is the buying and the selling of the goods and the services within the domestic boundaries of the country, and it covers every exchange from the factory to the shop as long as the goods do not cross the frontier of the country, and it is also called the domestic trade or the home trade.
• The contrast with the international trade is the frontier, since the international trade is the exchange across the national boundaries, carries the customs duty, involves the different currencies and the different laws, and runs on the documents of the export and the import, while the internal trade crosses no boundary, uses a single currency, and is governed by a single law of the land.
• The first type of the internal trade is the wholesale trade, in which the goods are bought in the large quantities from the producer or the manufacturer and are sold to the retailer in the smaller quantities, and the wholesaler deals in the bulk purchase and does not sell to the final consumer.
• The second type is the retail trade, in which the goods are sold to the final consumer in the small quantities for the personal use, and the retailer is the last link of the chain, and the difference between the two is the quantity and the buyer, because the wholesaler buys in the large quantity from the producer and sells to the reseller, and the retailer buys in the small quantity and sells to the consumer.
• The classification of the retail trade is into the itinerant retailers and the fixed shop retailers, and the classification of the fixed shop retailers is into the small scale and the large scale, and the forms of the large scale retail are the departmental stores, the chain stores and the mail order houses, and each of them is examined in the sections that follow.
• The internal trade is also the trade to which the auxiliaries belong, that is the banking, the insurance, the transport, the warehousing, the communication and the advertising, which serve the movement of the goods, but the syllabus of the 2024-25 examination places those services in the other units, and this unit itself is confined to the two links of the trade and to the GST.

The services of the wholesaler are asked in three groups, to the producer, to the retailer and to the consumer, and the answer is complete only when all three are written, because the wholesaler stands between the two and serves both.

• To the producer, the wholesaler provides a ready market, because he buys the entire stock and takes it away, and the producer can then concentrate on the production and does not have to find a buyer for each lot, and this reduces the risk of the producer and lets him use his capacity fully.
• To the producer, the wholesaler helps in the large scale of the production, because by buying in the bulk he makes the production in the large quantities possible and the producer enjoys the economies of the scale, and he also helps with the storage, so the producer does not need the large warehouse of his own, and he bears part of the risk of the fall of the price.
• To the producer, the wholesaler provides the market information, because he knows from the retailer what is selling and what is not, and he passes this knowledge to the producer, and he also provides the finance, because he often pays the producer in advance, and this is the credit that the wholesaler gives to the maker.
• To the retailer, the wholesaler breaks the bulk, so the retailer can buy the quantity that suits his own turnover and his own customers, without being obliged to hold the whole of a consignment, and he supplies the goods on the credit terms, and he delivers the goods to the shop of the retailer, and he passes on the market information of the producer.
• To the retailer, the wholesaler provides the assortment, that is the variety of the goods of many producers under one roof, so the retailer can fill his shop from a single order, and he also guides the retailer about the new products and about the terms, and he protects the retailer from the fluctuations of the price by holding the stock while the price is uncertain.
• To the consumer, the services of the wholesaler are indirect, and they are the availability of the goods in the shops at a steadier price, because the wholesaler holds the stock and releases it as the demand rises, and the comparison of the price that comes from the many retailers who buy from the same wholesaler, and the economy that the retailer passes on.
• The one word that binds the three is the gap, because the wholesaler fills the gap of the time and the place between the producer, who makes the goods at one place and at one time, and the retailer and the consumer, who want them at another place and at another time, and the three groups of the services are the three gaps that he fills.

The retailer is the link that touches the consumer, and his services are asked in three groups as well, to the wholesaler and to the consumer directly, and to the society as a whole.

• To the wholesaler, the retailer provides an outlet, because he takes the goods to the consumer and so completes the distribution that the wholesaler has begun, and he carries the stock near the consumer, so the wholesaler does not have to hold the whole of the stock himself, and the wholesaler's warehouse is relieved.
• To the wholesaler, the retailer provides the market information, because he is the one who hears the complaint and the demand of the final consumer, and he passes the message back through the chain, and he also reduces the burden of the finance of the wholesaler by selling the goods for the cash.
• To the consumer, the retailer is the accommodation of the wants, because he keeps the goods of many producers in the small quantities and at a convenient distance, and the consumer does not have to go to the warehouse or to the mill to buy a small quantity of a single article.
• To the consumer, the retailer provides the regular availability, the credit to the customers he knows, the personal service and the advice about the goods, the information about the new products and the new uses, the opportunity to see and to touch the goods before the purchase, and the facilities of the delivery and the after sale service and the exchange of the goods.
• To the consumer, the retailer also breaks the quantity, so that the household can buy the sugar, the salt and the milk in the daily quantities, and he keeps the price comparable, because the many retailers of a locality sell the same goods at the same market price, and this comparison protects the consumer.
• To the society, the retailer is a large employer, because the retail trade in the small shops employs a very large number of persons, and it is the easy entry of the self employment, and the retailer also helps the small producers of the locality to sell, so the skill and the craft of the neighbourhood find a market.
• The essential difference between the wholesaler and the retailer as the links is the direction of the contact, because the wholesaler looks towards the producer and the retailer looks towards the consumer, and the services of the retailer are therefore the services that the consumer feels and the services that the chain needs.

The retail trade is classified first into the itinerant and the fixed shop retailers, and the distinction is the place, because the itinerant has little or no fixed place and the fixed shop sells from a permanent location, and the syllabus wants the forms of both, so the list of the names is the mark.

• The itinerant retailers are the traders who carry the goods from the market to the door of the consumer and who have little or no fixed place of the business, and their stock is small and their capital is small and their touch is personal, and they are found in the street, in the market and in the housing colony.
• The forms of the itinerant retailing are the peddlers and the hawkers, who carry the goods on the head or in a vehicle and call at the doors, the street traders, who set up at a particular street of the city, the pavement stall holders, who spread the goods on the pavement, the market traders, who open at the market place on the fixed days, the cheap jacks, who shift their place frequently, and the dealers in the expensive goods, such as the carpets and the jewellery, who travel from one fair to another.
• The advantages of the itinerant retailer are the service at the door of the consumer, the economy of the capital, since no shop and no licence of a fixed place are needed, the flexibility of moving to where the demand is, and the employment that they give to the large number of the persons of the small means.
• The limitations of the itinerant retailer are the irregularity and the seasonal availability, since the consumer cannot depend on his return, the lack of the range, since the stock is small, the absence of any after sale service and of any credit, and the higher risk of the damage and of the loss, because the stock moves with the trader.
• The fixed shop retailers are the traders who sell from a permanent and a recognised place, and they are classified into the small scale and the large scale, and the fixed place gives them the advantage of the trust, of the regular customers and of the permanent display, but it also fixes them to the demand of the one locality.
• The small scale fixed shop retailers are the general stores, which keep the goods of many types under one roof for the convenience of the household, the single line stores, which deal in the one line of the goods, such as the shoes or the books, the specialty stores, which deal in the one particular article of a line, such as the children's shoes, and the second hand goods shops, which buy and sell the used goods.
• The large scale fixed shop retailers are the departmental stores, the chain stores and the mail order houses, and each of the three is a large organisation, and their concept, their features and their merits and their limitations are the next section, because the syllabus treats them separately.

The syllabus names three large scale retailers and asks for their concept, and each of them is a different answer to the same problem, which is the smallness of the single shop, and the three answers are the scale inside one building, the scale over many branches and the scale without any shop at all.

• The departmental store is a large retail establishment that sells a very wide variety of the goods under one roof, and the store is divided into the departments, each of which buys and sells its own line and is separately managed, so the store is in effect many shops in one building, and it is located in the centre of the city, and it adds the services, the restaurants, the banks and the recreational corners, to attract the family for the whole of a day.
• The merits of the departmental store are the convenience of the wide choice under one roof, the elimination of the middlemen, because the store buys directly from the producer, and the economy of the bulk, and the demerits are the very large capital, the heavy cost of the operation, the distance of the central location from the residences, the absence of the personal attention to the customer and the rigidity of the administration.
• The chain store, which is also called the multiple shop, is a retail organisation that runs a number of the branches in the different parts of the city and beyond, each selling the same limited line of the goods under the same name, and the buying is done centrally at the head office and the selling is done at each branch, and the goods, the price, the display and the method are standardised throughout the chain.
• The merits of the chain store are the economy of the centralised purchase, the low cost of the advertisement, since a single advertisement serves the whole of the chain, the public confidence in the uniform quality and price, the spread of the risk over the many branches and the small capital needed for the single branch, and the demerits are the limited variety, since every branch sells the same line, the absence of any personal service, credit or delivery, the unsuitability of the perishable and the fashion goods and the difficulty of adapting the one standard to the different demands of the different localities.
• The mail order business is the retail trade without a shop, in which the seller advertises the goods in the catalogue and the buyer selects from the catalogue and sends the order and the payment by the post, and the goods are then despatched by the post to the address of the buyer, and the seller maintains an office and a warehouse but no showroom.
• The advantages of the mail order business are the small capital, the absence of the middlemen and of the shop, the wide coverage, because the catalogue can reach the whole of the country, the absence of the bad debts, because the payment passes with the order, and the small staff, and the conditions of its success are the standardised goods, the good reputation, the cheap and the quick postal service, the knowledge of the tastes of the distant customers and the suitability only of the goods that can be described and posted.
• The limitations of the mail order business are that it cannot sell the goods which the buyer needs to inspect, that it cannot sell the perishable or the fashion goods, that there is no personal contact and so no personal service, that the delivery takes the time of the post, that the packing and the postage add to the cost of the goods, and that the trust of the unknown seller is the difficulty that the catalogues have to overcome.
• The comparison of the three, which is the favourite of the examination, is the structure, because the departmental store concentrates the scale in one central building, the chain store spreads the scale over the many branches, and the mail order house has the scale without any shop, and the customer of the first is the family of the city, the customer of the second the locality of each branch, and the customer of the third the holder of the catalogue anywhere in the country.

The syllabus asks two things about the Goods and Services Tax, the concept of it and its key features, and the concept has to be set against the many taxes that it replaced, because the GST is understood as the thing that ended the tax on the tax with the many taxes.

• The Goods and Services Tax, the GST, is a comprehensive and a destination based indirect tax that is levied on the supply of the goods and the services at every stage of the movement, from the sale by the producer to the sale to the consumer, and it was introduced with effect from the first of July 2017 through the hundred and first amendment of the Constitution, and its aim is the one nation, one tax.
• The GST replaced the many indirect taxes that had existed side by side, the excise duty of the centre, the service tax, the value added tax of the states, the central sales tax, the octroi, the entry tax, the luxury tax and the entertainment tax, and the single tax now stands where the many stood, and this is what the concept of the one nation, one tax means.
• The first key feature is the comprehensive coverage, because the GST is levied on the supply of the goods and the services alike, and the state of the goods and the services is the same, and the only exclusions are the alcohol for the human consumption and, for a period, the petroleum products.
• The second key feature is the dual nature, because in the federal system of India the tax is levied concurrently by the centre and the states, so on the supply within the state the central GST and the state GST are levied together, and on the supply between the states the integrated GST is levied by the centre, and the levies are the CGST, the SGST and the IGST.
• The third key feature is the destination basis, because the tax of a supply is collected at the point of the production and of the sale but it belongs to the state in which the goods are finally consumed, so the producing state does not keep the whole of the tax of its own goods, and this is what makes the GST a destination based, or a consumption based, tax.
• The fourth key feature is the input tax credit, which is the right of a registered business to set off the tax that it has paid on its purchases of the inputs against the tax that it must pay on its sales, and this breaks the chain of the tax on the tax, so the same value is not taxed twice, and the cascading effect of the old taxes is removed at the very root.
• The fifth key feature is the uniformity, because the rate of the same goods is the same across the whole of the country, and the rates rest on the four main slabs of the five, the twelve, the eighteen and the twenty eight per cent, with the exemption of the necessities at the zero rate and the cess on the sin and the luxury goods, and the decisions on the rates and the exemptions are taken by the GST Council, which is the forum of the finance minister of the union and of the ministers of the states.
• The sixth key feature is the mode of the compliance, because the registration, the return and the payment are all electronic, the registration is based on the permanent account number and is uniform in the country, the returns are filed on the portal, and the movement of the goods above a limit requires the generation of the electronic way bill, and the small taxpayer has the composition scheme with the reduced compliance.
• The result of the features, which is the sentence that closes the section, is that the cascading of the tax has ended, that the tax has widened the base and lowered the overall burden, that the compliance has been eased by the single return, and that the consumer pays less because the tax does not multiply itself at every stage of the chain.

The unit closes with the two consequences of the GST, the gains that it has given and the way the trading has shifted with the electronic retailing, and the two are what an examiner asks when the concept and the features have been written.

• The gain to the business is the removal of the cascading, so a business that pays the tax on its purchases does not pay the tax again on the same value, and this reduces the cost of the supply and the final price, and the business also complies through a single registration and a single return instead of the many registrations of the many taxes.
• The gain to the consumer is the fall of the price that follows the removal of the tax on the tax, and the uniformity of the price of the same goods across the country, and the consumer is also protected by the anti profiteering mechanism of the law, which requires a business to pass on the benefit of the reduction of the tax to the buyer.
• The gain to the state is the widening of the tax base and the easing of the collection, because the electronic record of the supply and of the credit makes the evasion harder, and the destination basis distributes the revenue to the states of the consumption and so to the economically weaker states as well.
• The interplay with the trade is that the GST has made the movement of the goods simpler within the country, because the goods now move with the electronic way bill instead of the checkpoints of the many states' taxes, and this has shortened the time and the cost of the internal trade.
• The last paragraph of the way of trading is the electronic retail, in which the retailer sells without a shop, the customer orders on the net and pays by the card or the wallet, and the goods are delivered to the door, and this is the e-retailing of the emerging modes unit, and it is the newest form of the retail trade, and it runs alongside the departmental store and the chain store rather than replacing them.
• The conclusion of the unit, which is the sentence to close every answer, is that the internal trade is the exchange within the country through the wholesaler and the retailer, that its forms extend from the hawker to the mail order house, that it is now carried on under the single comprehensive tax of the GST, and that the tax and the technology together have made the goods cheaper, the compliance easier and the movement faster.