As India enters GST era, small traders are hopeful, yet anxious

Unhappy within

A few hours before the midnight launch of the GST, Catch visited the labyrinthine lanes of Chandni Chowk in Delhi to speak to traders about the tax reform.

Most of the traders we spoke to were unhappy with the time given to them to adapt to the new regime. Wholesale cloth traders were on strike, demanding a rollback of the high tax on cloth and textiles under GST, but retail traders were hopeful that the expected initial glitches would be resolved within a few weeks.

However, there were also those who were completely against the way GST was imposed on them. But on the record, they would only say positive things about the new tax law, to avoid any backlash from the government.

Three basic problems

As per the traders of Chandni Chowk, there are three major worries going into the GST era:

1. Invoice Matching: Under the new system, for availing input credit, all the suppliers within the supply chain must file authentic invoices in the GST network. For example, if a product has passed through the hands of 10 suppliers, and if the supplier number four and seven have not uploaded correct invoices in their systems, then none of the other suppliers will be able to claim input tax credit. The supplier further down the chain gets only five days to ask the supplier above him to upload the correct invoice.

“Why should the honest trader be punished for the fault of someone else? I am small trader and I keep all the details of the sales that I make. But how can I be responsible for someone else's fraud?” asked a cloth trader.

2. Anti-profiteering provision: Under GST, the government has introduced the provision of an anti-profiteering agency, which can initiate investigations against a trader on the allegation of not passing on the benefits of GST to customers.

The law, traders fear, can bring in the era of 'inspector raj'. “ The government should rethink this provision, as traders are new to the GST system. If there is some mistake by the traders in the initial phase, the government should be compassionate towards the traders, as we need time to learn to comply. If the government cancels the registration of the trader for such mistakes, it will create an environment of fear among traders,” said a bullion trader in Kucha Mahajan.

3. No registration under GST yet: It is ironic that as GST comes into force from midnight on 1 July, there are hundreds of traders who have not managed to get themselves registered under GST. This means that they will not be able to sell their products until they get a registration, leading to a loss that may run into lakhs of rupees per day.

“I have failed to get registration for my business despite trying many times. Everyday, there is some reason or the other due to which the government is not able to give us registration. If we do not get registration by today evening, from tomorrow, I will keep my shop open but will not sell anything,” said Ajay Kumar Goenka, chairman of the Delhi Saree Mercantile Association.

Traders to bear the brunt

Whatever be the apprehensions and fears of the traders, the economy will enter a new phase of taxation at the stroke of midnight on 1 July. The government will try its best to have a smooth transition to a unified tax regime.

But in the process, if there are some hiccups, the traders will have to bear the brunt of it.