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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


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