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GST: 60 per cent small enterprises could close down, even as small businessmen shudder

BY FLYNN REMEDIOS: IndiaScribes.com surveyed about 400 small to very small businesses in North and South Goa. Most of the businesses and their owners do not even have a proper “office” and operate from home, using their mobile phones. They do not have  a company or business website and many of them are not even email savvy, and their business is not registered in any way.

Some of them did not even have a Pan card or Aadhar card and in a few cases both. They operated using either their  very old proprietorship ‘Current Accounts’ which were opened nearly 20-25 years ago, when KYC norms and rules were nearly non-existent and one could ‘simply introduce’ a neighbor or friend who could then open his own Current Account by merely providing his Ration Card or Election Voter ID card. A few ran their business using just their ‘Savings Account” or maybe  their wife’s Saving’s Account as well.

We will now be forced to spend on several “overheads”. Our margins are not so high and we work on paper-thin margins. In this scenario, small businesses will be forced to ‘invest’ in certain overheads, which will greatly affect our income at least for the next six months. We have just recovered from the demonetization demon and the Central government should have kept a gap of at least 12 months between the demonetization exercise and before GST came  into force. It looks like the Modi government is hell bent on fleecing very small businesses and making them suffer, said Anthony Fernandes of the Goa Citizens Action Forum.

Small units may, perforce, have to register themselves and become taxpayers if they are to survive in the new regime of GST, said a senior official of the commercial tax department, reports the Navhind Times, even as small businessmen are a worried lot with the GST regime set to kick in within 48 hours pan India.

He said the GST system incentivises registration. It encourages units to go in for registration if they want to do business.

“Fear of reverse charge mechanism may discourage registered taxpayers from doing frequent business with non-GST registered units,” he explained.

Small units are anxious about survival under the GST regime and the lack of understand and knowledge about the systems and processes play a major role in this.

According to reports, half of the small unregistered units that supply to large companies could close down after the new regime comes in force, says the Navhind Times.

The concerns appear to be justified although under the GST regime a registered unit can continue to do business with an unregistered unit. A registered company can purchase goods valued at not more than Rs 5,000 per day from an unregistered dealer.

But daily purchases from an unregistered supplier could result in tax liability on the recipient by way of reverse charges, explained the senior official.

Under GST system, units with turnover below Rs 20,000 are not required to register themselves. However with registered companies preferring to deal with registered counterparts it is quite likely that many small units will scale up and get the GST number or risk folding up in the new regime.

Ahead of GST implementation from July 1 the commercial tax department organised a press briefing on the impact of the forthcoming tax.

Additional commissioner Rajan Satardekar said that Goa’s tax collections that are currently around Rs 3100 crore annually could increase by about Rs 900 crore.

The commercial tax department is also likely to earn more from casinos, he said, adding that casinos fall under 28 per cent GST slab.

“The system is self-policing. It ensures compliance,” Satardekar said. For the organisations that are timely with payment of GST the government is planning a credit rating system, he said.

The details of the rating system will be announced shortly.

with inputs from Navhind Times






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One comment

  1. Turnover 20,000/- or 2,00,000/-?

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