This Article is From Aug 03, 2016

How GST Will Help Small Businesses

Small scale manufacturers echo what Chief Economic Adviser meant by GST 'self-policing' initiative.

New Delhi: Many understand Goods and Services Tax or GST as a tax that subsumes all indirect taxes to create one tax. But for many small manufacturers here in Delhi's Kashmere Gate, Asia's largest spare parts market, GST also means dealing, hopefully, with only one tax inspector.

The manufacturers agreed to speak to NDTV on condition of anonymity, which in itself highlights the fear of tax officials.  

For Sanjay (name changed), a 50-year-old automobile parts manufacturer in Delhi, GST will be a breather. "Currently, I have five departments on my head right now. I file tax returns biannually, annually, quarterly for different taxes. The more the number of departments the more the harassment."

Other small scale manufacturers echo what Chief Economic Adviser Arvind Subramanian meant by GST 'self-policing' initiative.

For the manufacturer NDTV spoke to, current taxes levied both by state and centre add up 32 per cent, this includes VAT, Central State Tax, Octroi, Excise and other cesses. Bribes paid to tax officials to avoid tax are roughly 20 per cent. The difference is huge, therefore paying a bribe is worth it.

But under GST, where the tax will be lower (between 18-22 per cent), paying a bribe won't make sense.

Another manufacturer said, "A person who is currently bribing officials will realise that he just has to pay a little more than the bribe and would prefer to come under a simple tax regime."

Vijay Kumar, a Chartered Accountant, thinks GST will decrease, if not eliminate, interactions with tax inspectors. "After GST, all taxes will be under one law and the system will be computerised. Human intervention will decrease, a computer can't harass you."

'Grueling' is how many small businesses describe the current tax regime. The GST in the words of the BJP and the Congress may actually improve "ease of doing business" and "unleash the animal spirit" of entrepreneurs.