CHAPTER - 9 INTERNAL TRADE
Types of Internal Trade
Internal Trade refers to the buying and selling of goods and services within the boundaries of a
country. It can be classified into two main types:
1. Wholesale Trade
Definition:
Wholesale trade refers to the buying of goods in large quantities from manufacturers or
producers and selling them in smaller quantities to retailers or other businesses.
Features of Wholesale Trade:
Bulk Buying and Selling: Wholesalers buy in large quantities and sell in smaller lots to
retailers.
Link Between Producer and Retailer: They serve as intermediaries between
manufacturers and retailers.
No Direct Deal with Consumers: Wholesalers generally do not sell to final consumers.
Warehousing: They store goods in large warehouses.
Financing: Wholesalers often provide credit to retailers.
Risk Bearing: They take risks like price fluctuation, storage loss, or theft.
Market Information: Wholesalers provide valuable feedback from retailers to
manufacturers.
2. Retail Trade
Definition:
Retail trade refers to the sale of goods in small quantities directly to the final consumers for
personal use.
Features of Retail Trade:
Direct Contact with Consumers: Retailers sell directly to end users.
Small Quantity Sale: Goods are sold in individual units or small quantities.
Variety of Goods: Retailers usually stock a variety of products to meet consumer needs.
Customer Service: They provide services like home delivery, credit, installation, etc.
Last Link in Distribution Chain: Retailers form the final link in the chain of distribution.
Location: They are located close to residential or commercial areas.
Sales Promotion: Retailers often use methods like discounts, display, and offers to
attract buyers.
Services to Manufacturers and Retailers by Wholesalers
Wholesalers play a very important role between manufacturers and retailers. They provide
useful services to both.
✅ Services to Manufacturers:
1. Large Orders
Wholesalers buy in bulk, so manufacturers get large and regular orders.
2. Storage Help
Manufacturers don’t need to store goods for long because wholesalers keep the stock.
3. Financial Support
Wholesalers pay in advance or quickly, so manufacturers get working capital.
4. Market Information
Wholesalers share market trends and customer preferences with manufacturers.
5. Reduced Marketing Cost
Manufacturers don’t have to spend much on advertising, as wholesalers take care of
distribution.
✅ Services to Retailers:
1. Regular Supply
Wholesalers provide regular and ready stock to retailers.
2. Variety of Goods
Retailers get access to different brands and product types from one place.
3. Credit Facility
Retailers often get goods on credit from wholesalers.
4. Storage Relief
Retailers don’t need big storage spaces because wholesalers supply as per need.
5. Product Information
Wholesalers provide info about new products, price changes, and features.
🌟 Retail Trade
📌 Definition:
Retail trade refers to the buying of goods from wholesalers or manufacturers and selling them
directly to final consumers in small quantities for personal use.
🧾 Features of Retail Trade:
1. Direct to Consumers: Retailers sell goods directly to the end users.
2. Small Quantity: Goods are sold in small units according to customer needs.
3. Personal Contact: Retailers often have direct interaction with buyers.
4. Variety of Products: Retailers stock different brands, qualities, and types of goods.
5. Convenient Location: Shops are usually located in easily accessible places.
6. Customer Service: Retailers may offer services like home delivery, exchange, etc.
7. No Production Activity: Retailers only distribute goods; they do not manufacture.
🎯 Services of Retailers to Consumers:
1. Wide Choice of Goods
2. Convenience in Buying
3. After-Sale Services
4. Credit Facility
5. Personal Attention
6. Information About New Products
7. Home Delivery
💼 Services of Retailers to Wholesalers & Manufacturers:
✅ To Wholesalers:
1. Help in selling goods in small lots.
2. Spread goods to large geographic areas.
3. Provide information about consumer preferences.
✅ To Manufacturers:
1. Product Promotion: Through personal selling and display.
2. Market Feedback: Retailers give feedback on product performance.
3. Stabilize Production: By ensuring continuous demand.
4. Help in Launching New Products: Retailers assist in introducing new items to the
market.
🌟 RETAIL TRADE
Retail trade refers to the buying of goods from wholesalers or manufacturers and selling them
in small quantities to the final consumers.
TYPES OF RETAIL TRADE
Retailers are mainly classified into two types:
1️⃣ ITINERANT RETAILERS (Mobile Retailers)
They do not have a fixed place of business. They move from place to place to sell their goods,
often door-to-door or in markets.
➤ Types of Itinerant Retailers:
Type Description
Hawkers and Travel on foot, carts, or bicycles carrying goods to homes or streets. They sell
Peddlers low-cost daily-use items like vegetables, fruits, toys, etc.
Set up shops only on market days in specific localities. Usually deal in seasonal
Market Traders
goods.
Sell goods on busy streets or outside offices/schools, etc. Have a temporary
Street Traders
stall or table. Example: balloon seller.
Have a temporary shop in one area, stay for a few days/weeks, and then move
Cheap Jacks
to another location. Example: sellers of utensils, clocks, repair services.
✅ Features of Itinerant Retailers:
Low investment
No fixed shop
Deal in limited stock
Personalized service
Flexible location
2️⃣ FIXED SHOP RETAILERS
They have a permanent location for their shop. They generally have larger stock and deal in
specific types of goods.
➤ Types of Fixed Shop Retailers:
Type Description
Small-Scale Operate with limited capital and stock. Examples: general stores, stationery
Retailers shops.
Large-Scale Operate on a larger scale with modern infrastructure. Examples: department
Retailers stores, malls, supermarkets.
➤ Types of Small-Scale Fixed Shop Retailers:
Type Description
General Stores Sell a variety of items of daily need – groceries, soaps, etc.
Specialty Shops Deal in one specific product like shoes, watches, cosmetics, etc.
Small stalls on pavements or markets. Sell low-cost items like snacks,
Street Stall Holders
pens, mobile covers, etc.
Second-hand Goods
Sell used goods like furniture, electronics, books.
Dealers
Single Line Stores Sell only one line of product, like only garments or only electronics.
✅ Features of Fixed Shop Retailers:
Permanent shop location
Greater credibility
Wide variety and stock
Better customer trust
Facility for after-sales service
Higher investment and overhead costs
GOODS AND SERVICES TAX (GST)
Definition:
Goods and Services Tax (GST) is a single indirect tax levied on the supply of goods and services
in India. It replaced many indirect taxes like VAT, service tax, excise duty, etc. GST is collected at
every stage of the supply chain and is based on value addition.
✅ FEATURES OF GST
1. One Nation, One Tax
GST is a unified tax for the entire country.
2. Multi-Stage Tax
Levied at every stage – from manufacturer to consumer.
3. Value Addition-Based
Tax is charged only on the value added at each stage.
4. Input Tax Credit (ITC)
Businesses can claim credit for the tax they paid on purchases.
5. Destination-Based Tax
GST is collected in the state where goods/services are consumed.
6. Dual Structure
o CGST: Central GST (collected by Central Govt.)
o SGST: State GST (collected by State Govt.)
o IGST: Integrated GST (for interstate transactions)
📦 TYPES OF GST
Type Full Form When Applicable
CGST Central Goods and Services Tax Intra-state sale (within same state)
SGST State Goods and Services Tax Intra-state sale (within same state)
IGST Integrated Goods and Services Tax Inter-state sale (between states)
UTGST Union Territory GST In Union Territories without legislature
BENEFITS OF GST
Removes the cascading effect of taxes (tax on tax)
Simplifies the indirect tax system
Increases transparency and compliance
Promotes ease of doing business
Helps in formalizing the economy