It’s been 10 months since the big bang tax reform Goods and Services Tax (GST) came into force. There were many apprehensions, chief among those was the worry of the major producer states like Maharashtra, Gujarat and Tamil Nadu that their tax kitty will have a negative impact. However, such fears have been belied as the GST tax collections of such states show. As expected, it was indeed disruptive in the short term. But teething troubles in implementation have been slowly but surely brought down by the GST council. The rates have been rationalised, small traders have been given a lot of breathing room by raising the exemption limit, exporters’ concerns have been listened to and redressed to a large extent, and compliance has been made easier by easing the norms.
The Narendra Modi government deserves kudos for not making best the enemy of good. It didn’t wait around to arrive at the best possible and ideal GST, a mistake the previous United Progressive Alliance government did. Arun Jaitley and Modi didn’t take the ‘my way or highway approach’ of Chidambaram either. They gave in to various demands of the states, most important of all that they be compensated for any revenue forego on account of low collections under the new regime for five years.
However, as is the case with any complex reform of such huge proportions involving millions of stakeholders, there are bound to be implementation issues beyond teething problems too. To probe the nature of such issues and get the feedback of traders we asked some of them how they were coping with the new tax system.
Ravinder Singh, who has been running his garment shop in Chandni Chowk area for the last two decades, told Swarajya that he has seen his profits reduce by a margin of 15-20 per cent due to GST. Some of it is going to the government in form of taxes.“It’s good for the country. And there are issues but those will get resolved in the long term.”
Garment traders we talked to complained that the GST tax slab was high and could be reduced. But Singh said that more than slab, it is important that we have one fixed rate. There is different rate for different items. “Main to kehta hoon beshak slab badha do, par ek fix kar do, har cheez pe alag tax se bahut confusion hai,” he said. This complexity has certainly made life more enriching for the professional chartered accountants (CAs), at least that’s what the traders feel, those who are shelling out more than ever to pay the people who oversee their tax filing.
“It’s a boon for CAs, certainly. I am paying mine double of what I used to before because the compliance work has gone up,” he said. Singh also said that tax filing should be less frequent so that compliance costs come down. “Reverse charge mechanism in GST is not working smoothly. People aren’t getting the refunds. Lots of money is stuck. This should be made simpler. Final tax should be paid by each entity,” he added.
Earlier, the suppliers of goods and services, for instance, paid the tax on their supply. Now, when they supply to someone who is selling it to the final consumer, then the receiver is paying all the tax. He is supposed to get the reverse charge from the supplier but this isn’t working as smoothly as the traders would like it to be.
But Singh is hopeful that the system will be successful in the long term however he believes the inconvenience caused by the GST will be raised by opposition to score brownie points as it has the potential to be an election issue. “If Congress comes back to power, it will remove GST. Even if they don’t, they know this is an issue that can get them votes,” he adds.
However, he considered our exercise to report on ground problems with GST as futile as no one is listening in the government.
Deepak Bindal, a wholesale men’s clothing dealer in Katra Pyarelal who is a member of the market association, said that no matter how much we write and report, it will fall on deaf ears. “We have tried everything. They just don’t listen to us,” he said. “See, these bureaucrats visit foreign countries and see how well the GST is working and implement it here with small change here and there. They don’t know ground realities here. It’s an imported GST model,” Bindal told us.
Harjit Singh Chhabra, general secretary of Sadar Nishkarm Welfare Association (Sadar is one of the biggest wholesale markets in Delhi), paints a very grim picture of GST's after-effects. He says the government's ill-informed move to first raise the GST on automobile spare parts from 12 per cent to 28 per cent hit them hard. Even though the slab was revised to 18 per cent, the tax remains too high, said Chhabra. Spare parts are one of the largest trading item in the market.
"For the first two-three months of GST, it looked like there was a curfew in the market. You could drive a car at 100 kph here. There were just no customers!" he says.
Ideally, he says, GST should benefit them as traders want to come under the tax net. In local parlance, it is called doing business "in number one" that is, legally. But the rates remain too high and business has come down significantly, so GST has only brought misery to traders, he says.
Chhabra details other problems too. "Most traders here are not educated enough to understand tax. They are taking services of accountants for the first time, who are fooling them. The government talks of digital India, but how about educating people first?"
In general, the situation remains miserable for traders since demonetisation. "We have been attacked again and again. First note-bandi, then GST, then sealing. Our customers have disappeared and our labour has returned to the villages. We don't know when we will recover."
Kuldeep Singh Sawhney, Sarojini Market shopkeepers association head, says GST has delivered a body blow to "middle-class traders". He explains, "Sarojini market is mainly into clothes and shoes. The newly introduced tax on clothes has increased the prices, which isn't working out well for us. The footfall has come down. Even the varying GST rates on shoes has left us confused. They should make them even."
Echoing a similar sentiment as Chhabra, Sawhney said that the government is attempting too much in too short a time. "They must realise that the bulk of the traders don't know anything about accountancy and taxes. Suddenly, they are running from pillar to post to file their taxes. I get frantic calls from traders asking me if they are 'safe'."
"The government should have taken things slowly. Everything from digitisation to mandatory filing of taxes has been imposed on us all of a sudden. We are scared," he said.
A dry fruits trader in Chandni Chowk area who wishes to be anonymous told Swarajya that refunds are a real problem and the business hasn’t gone back to the pre-GST levels. “There is definitely a decrease in sales. Our business is of wholesale. Earlier, if a trader used to buy 1 Kg from us, now he is buying 600 gram, so profit is bound to decrease,” he said. “This whole refund business is poorly designed. And we have to deal with so many rates as different kinds of dry fruits fall in so many different categories. It’s highly complex,” he added. He made another important observation regarding how demonetisation and GST impacted his business. He said that while demonetisation’s impact was temporary, GST’s impact seems to be more drawn out and long lasting.
Traders are hoping that the government listens to their woes and various issues get resolved as soon as possible.
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