GST and Small Businesses

Impact of GST on FMCG industry

The GST was formally launched at the stroke of midnight on 30th June and India heralded a new era of the largest tax reform as the July 2017 month dawned. There was news of the Big Bazaar outlets being open for two hours beyond midnight and people got the billing done with the GST in place. Large automobile makers like Maruti, Yamaha etc. were quick to announce the reduction in prices of various models as they passed on the tax benefits to the consumers. Apple too slashed the prices of its iPhone models in a similar bid. We could also see people posting their bills with GST applied in hotels, restaurants and dhabbas, on WhatsApp groups.

The large industries, corporate houses, traders, businessmen and dealers had some preparation in place for the GST and it was business as usual for them on the very first day. Many enthusiastic small and medium businessmen too had prepared well in advance for the GST. The picture seemed pathetic when we got in touch with small businessmen and traders. We did not find any eagerness or interest in their dealings even when we talked about GST a few days before the launch.

A stationery shop owner with a well-stocked premises replied to our queries on GST readiness with a simple answer: “We will follow what others will do.” When we asked for a bill for a purchase made on 1st of July, he said the new bill books are under printing and will come in the next 2-3 days and till then they can issue a katcha bill. The government advertisement in the newspaper says that you can adopt any format for the invoice so long as you make a mention of the few important requirements. A simple computer print would have done the job, but the seller was not interested.

We buy steel brackets from a small businessman who has a small set up in the Delhi NCR. The businessman sources the excise paid steel sheet from a supplier who charges VAT on it. The supplier cuts the sheet to size and delivers it to the businessman with a VAT bill. The businessman does blanking and punching and supplies the formed brackets to us with VAT. In this chain, none of the three agencies involved is registered with excise as all three are small traders or businessmen under the excise limit of 2-Cr. annual turnover.  We asked the businessman for GST readiness from July. Please read on as to what he had to say.

“It is the duty of their hired CA to guide them through GST. He has the provisional ID and login password.” We were worried on how the GST would appear in the July invoices. On telling him that the GST rate will subsume the excise paid (12.5%) on the sheet and VAT charges (5%) on the cutting, he looked confused. He said he is dependent on the steel sheet supplier who sources the excise paid sheet from the big manufacturers or the “mandi”. He has not even talked to him for the GST paid steel sheet and is unaware of the anti-profiteering clause.

There are approximately 6 Cr. small businessmen out of who around 4 Cr. are likely to be covered under GST as they are above the 20-Lakh turnover threshold. About 50 per cent of them are digitally illiterate or do not have a PC/Laptop. They need the help of a CA at an additional cost to tide over the GST requirements. The government and GST council need to come to the aid of this large segment of businessmen on an urgent basis if GST has to be a success.

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