Mubashir Ahmedi of AP Products, maker of Virgo Toys in Mumbai, is keeping his fingers crossed for the D-Day.
The toy manufacturer has registered for goods and services tax (GST) and is bracing for initial turbulence as the nation shifts to ‘one-nation, one-tax’ regime.
But that’s least of Ahmedi’s headaches.
Toys are mostly assembled from different smaller parts, supplied by various small-and-tiny-scale makers, the weakest link in the GST chain that the economy has to grapple with beginning July 1.
“In the GST regime, I wouldn’t prefer buying from an unregistered supplier nor sell to an unregistered dealer. As far as I know, most of my suppliers are on board. For those who don’t get registered by the deadline, I need to change those suppliers,” Ahmedi told DNA Money.
Unfortunately for Ahmedi, not all of his suppliers, particularly the smallest of the lot, would embrace the new regime.
“Things would be difficult for many of my small suppliers, many of whom might not exist in the coming days,” he said.
Ahmedi is also worried about the fate of the stock he is carrying now and how much of it would remain unsold till the night of June 30.
“I guess we have to bear the loss as the chances of refund by the government for the pre-GST stock are remote,” he said.
Nilanjan Mitra, a chartered accountant and an auditor of many small businesses based in and around Kolkata, believes half of the small businesses in the country would cease to exist unless they grow fast enough to bear the burden of GST, particularly in terms of costs of logistics to remain compliant. “Close to 50% of the SMEs (small and medium enterprises) would cease to exist in 3 to 4 years unless they scale up,” he said.
“The whole economics of small businesses and logistics involving multiple layers of traders would undergo a paradigm change favouring large players,” said Mitra.Every small manufacturer would weigh the benefits of being GST compliant and getting input credits against the compliance cost of thrice a month filing, he added.
Apart from the process of registration, awareness is also low about who all actually need to get registered. “If an SME is a supplier to any government department, all such contractors are being forced to register irrespective of their turnover level.”
While firms having a turnover of less than Rs 20 lakh a month are exempted, they would find it difficult to get business from the government unless they register.
Besides, small businesses are also in a state of denial.
“There are many jewellers who haven’t yet got registered due to reasons like confusion over some grey areas or because of our expectation that there would be modifications in the scheme which we have asked for. If they don’t come till the last day, the industry would face the consequences,” said Pankaj Parekh of India Bullion and Jewellers Association.
Despite such scattered feeling of disappointment across sectors, some like Ahmedi are hopeful of better days ahead. “I sincerely hope that GST would be good for the economy,” said the Mumbai-based toy maker.
FINGERS CROSSED
- Not all suppliers would embrace the new regime
- SMEs would cease to exist unless they grow fast
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