80% SMEs Anxious About GST Post Demonetisation

While the ambiguity continues over the GST roll out dates and rates, SMEs and Startups have already started feeling anxious on GST. A National Toll Free GST Helpline (1800 103 9271) has reported over 10,365 calls on GST enrollment and other queries where the impact on business post GST is the high times asked query on call. Study of a national toll free GST helpline run by a taxation domain company, KDK Software, reveals that over 70% calls received had a single concern on GST rates and whether this will be a beneficial tax structure to the small business.

Indian economy is expected to become a $5 trillion economy by 2025 and to achieve this India needs to strengthen SMEs as it is a back-bone of the nation’s growth. As per the Ministry for Micro, Small and Medium Enterprises, 45% of the country’s industrial output is produced by SME sector for national and international demand. Over 30 million SMEs of India is the next big thing that central government will have to take care for. SME sector contributes a lot in terms of its GDP share, Employment, Innovation etc.

Mr. Mohit Bhambani, CEO of KDK Software says, “With the recent demonetization and upcoming GST regime, SMEs and Startups are facing very challenging economic environment in addition to their experience of several highs and lows during the past five years. On the other side, central government very well understands the importance of SME sector and has re-implemented Public Procurement Policy, and also launched Make in India, Startup India and Skill India campaigns to promote SMEs. Government has created an eco system for providing financial and technical support to SMEs.”

The threshold level in proposed GST bill is reduced to Rs. 10 lakhs in general and Rs. 5 Lakhs for the North Eastern States which is Rs. 1.5 crore in the current central excise law and not covering the chunk of SMEs which are exempted in current tax structure. This will significantly impact the SMEs’ working capital as since the threshold is low, most SMEs will have to pay high portion of their capital towards tax in future.

Mr. Bhambani further added, “About 80% calls received were from the organization having a business turnover below 1 crore. We found most of them were worried on the GST rates and how it will be levied on supply in case a company is supplying products directly to the end customers. Since it will not be available for input credit, it will be increasing the cost of production which may not be in favour of such SMEs.”

Also there is no tax differentiation for luxury items and services under proposed GST regime which may lead to rich become richer and poor become poorer, resulting bad situation for SMEs and creating competition against large business groups.