Skip to main content

Small Businesses Jittery Over GST

GST roll-out may prove to be a bumpy ride for small businesses in Tamil Nadu, Andhra Pradesh and Telangana, according to multiple businesspeople ET spoke to.

While larger companies have either already aligned their systems with GST or are in the last leg of the process, uncertainty looms over small businesses, say industry associations that expect the “transition will be painful for SMEs.”

“Small and medium enterprises are jittery about the transition,” said A P K Reddy, president, Federation of Small and Medium Enterprises. “SME sector has been using basic tallying technologies only. That may create some issues with GST compliance. While a majority of them have got the GST numbers, we’re all jittery about complying with the return processes.”

There is also the threat of cost increase for small pharmacies that run on thin margins. “We expect the spillover of a price increase will not reach retailers or end-customers, but there is always an element of uncertainty,” said Rajesh Nandipati, founder and MD of clinical retail chain go Clinix Healthcare.

To deal with disruptions due to GST, pharmacists are leveraging cloud software. Point-of-sale software provider hCue is helping retailers compute sales with real-time changes in tax rate under the GST and automating the invoicing and report generation required for compliance procedures.

“Still, there are uncertainties over tax rates because the classifications of many products we see at a pharmacy are hazy. Of course, through this PoS software the retailers can raise a bill once GST rates are fixed,” said Vijay Thirumalai, co-founder, hCue.

Meanwhile, dairy industry is facing challenges in computing input tax cre- dit. D Sunil Reddy, managing director of Hyderabad-based Dodla Dairy, said: “We are staring at a complicated situation wherein assessing the power cost used for manufacturing ghee, taxed at 12%, would be difficult as the same power is used for processing liquid milk and the premises too. ”

Some industries like sugar have made little efforts for the transition due to uncertainty on tax on sugarcane. Sugar producers are unclear if sugarcane attracts GST. The law divides sugarcane into two parts: one to be used for planting -- seed quality and a non-seed classification that stands for a 5% GST. But another law states any agricultural produce devoid of value addition is exempted from the tax. “The sugarcane we procure is farmfresh. It’s neither frozen nor dried, and it is not seed quality. So, the tax for sugarcane to be crushed has not been properly addressed,” says N Ramanathan, MD of Ponni Sugars.

The transition is also going to pinch farmers as dealers of agri inputs will observe a three-day shutdown till July 3 to ensure smooth transition to GST. M Prahakar Rao, MD, Nuziveedu Seeds, said: “There will be not be any movement of goods from the company to the trader level for two to three days to ensure a smooth transition.”Ram Gopal Agarwal, chairman, agrochemical company Dhanuka Agritech, too confirmed shutdown of trade for sometime.

Spinning mills and garment producers dealing in cotton products are, however, ready to place the first order on July 1. “Four hundred of us will place orders for cotton fiber on the first day as a symbolic affirmation of the GST. While we are in fact happy with the cotton tax rates, man-made fiber yarn has been taxed anomalously. It needs revision,” said Prabhu Damodharan, secretary of Indian Texpreneurs Federation.

The Economic Times New Delhi, 30th June 2017


Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

New money laundering norms stump jewellery sector

New money laundering norms stump jewellery sector Dealers with turnover of Rs 2 crore and above covered; industry says threshold too low The central government has notified the money laundering rules for the gems and jewellery sector with immediate effect. Now, any entity deals in precious metals, precious stones, or other high-value goods and has a turnover of Rs 2 crore or more in a financial year will be covered under the Prevention of Money Laundering Act, 2002 (PMLA, 2002). The limit of Rs 2 crore would be calculated on the basis of the previous year’s turnover, said the notification. The directorate general of goods and service tax intelligence has been appointed under the Act. Sources said the government’s move to apply the PMLA to the jewellery sector was a fallout of income-tax raids on jewellers soon after demonetisation last November, when it was found that they sold gold and jewellery at a huge premium and accepted old currency notes as payment. The notification, issued on Augus…

Confusion over branded food GST

Confusion over branded food GST The GST Council's statement over the weekend on applying tax on branded food items has left most of the trade confused.

Even though the Council has not changed the rates on food -0 per cent on unbranded stuff and 5 per cent on brands -many small traders who didn't levy GST earlier said they could come under the 5 per cent slab after the clarification.

While they predicted some increase in consumer prices, large players said they can absorb GST in many ways and keep prices steady.

"Trade is confused and hence on behalf of our chamber, we have asked our members to go ahead and charge 5 per cent GST," said Sushil Sureka, general secretary of the Ahilya Chamber of Commerce and Industry in Indore.

The statement clarifying the application of GST came after some businesses were found deregistering their brands and selling under corporate brand name without paying tax, after the Council exempted unbranded food from the new all-encompassing indirec…