Small and medium businesses are having trouble with working capital and compliance with GST
For S Athmanesan, a small scale automobile component manufacturer, the Goods and Services Tax has made money flow tougher. The companies he sells to, pay him only after 60 days but he must pay GST on their bills by the 20th of each month.
That locks up about fifteen per cent of his monthly working capital which makes it tougher to pay salaries, buy supplies and so on. With a Rs 50 lakh turnover he employs ten people, paying close to a lakh as salary every month.
Now he also has to spend a thousand rupees every month for an auditor to file his GST online.
He's been forced to borrow around Rs 50,000 on interest from private money lenders to pay GST on time. He did not have to take loans earlier as Value Added Tax (VAT) which was in force before was much less.
"We pledge jewels, or borrow from money lenders and pay 3 per cent interest. If banks give us Rs 2 lakh buffer then its fine. We are asking banks to increase working capital," this Proprietor of Rolf Harr Automats added.
Nearby in the same Ambattur Industrial Estate area, V Hamsa who makes parts of railway coaches is losing working capital of around 25 lakh every month as there's no complete refund of input tax.
Though her company Universal Engineers Ltd. buys stainless steel and other raw materials paying from 18 to 28 per cent GST, she can collect just five per cent for this category of products supplied to railways under chapter 86. There's no refund to claim the 13 to 23 per cent GST she has already paid.
She does business worth Rs 85 crore a year. She says this will not be commercially feasible in the long run as she's unable to recover the Rs 25 lakh GST from her customer, the Integral Coach Factory. She has no other business to set off the unutilised input tax.
Though orders from the Railways have not reduced, she is worried about the 750 people she employs.
Hamsa says "When we have less orders we will have to reduce our people. We are outsourcing many works and they can't. We can't support many small scale industries."
From a hit to working capital to fear of job losses and closure, there's uncertainty among small and medium scale industries on the impact of GST. They hope the government would intervene before it's too late.