Page 22 - Unleashed BMM 2019-2020

GST :

Indispensable Reform

or Economic Blunder?

It has been two years since the Narendra Modi led NDA government levied Goods and Services Tax
(GST) on July 01, 2017. Was it an indispensable tax reform or an economic blunder? Devik Jain
finds out by taking a stroll through Surat’s Textile market, talking to small as well as big traders and
workers. CA Monark Padmani shares his expertise on the contribution of GST to national economy.

s soon as you step into Surat, its A major change in the unorganised circle was labour, but it also produced job opportunities
bustling roads itself tells you the that after GST, bank transactions became as well as increased manpower requirements.
Alegacy of how the city has developed mandatory and gradually increased. This led to With the introduction of the new tax regime,
over the century. Right from the Delhi Gate to the reduction in the purchasing power of the everything became computerized and GST
the famous Ring Road area where the textile buyers (resellers, retailers, manufacturers) as accountants had to be hired. For the big firms,
industry has flourished, the shrieking noise of the rotation of the liquid cash became low. the compliance and paperwork increased as the
the horns of trucks, tempo vans paints a lucid As India is still a cash-driven economy, 50% GST returns have to be filed thrice in a month.
picture. As we move inside the lanes of Ring of the agency business got affected as the A sudden increase in the paperwork and the
Road, huge buildings with the fancy names accounting work led to building up of pressure
boast of how the economy thrives. among the manufacturers, wholesalers and
Situated on the banks of the
The Goods and Services Tax had an impact retailers.
on almost every aspect of this sector. Right Tapi River, and lying mid “Earlier, only, a commission ledger had to
from the manufacturing to the retail segment all way between Ahmedabad be maintained which included the accounts of
were affected. It was not welcomed and Mumbai, Surat is India’s commission earned on which TDS was
whole heartedly by the existing value chains in largest producer of synthetic deducted. Now, GST has to be paid on the
the sector. Most of the shops in these giant fabrics. The city, located in commission earned too and the GST return has
markets were run by small and medium-sized South Gujarat dominates the to be filed once every month. Service Tax was
traders, manufacturers etc. who were largely a levied irrespective of how much service we
part of disintegrated value chain units. They polyester sari market. With offered. All these conditions made it difficult to
practised an unorganised form of business as an overall annual turnover of trade during the initial days of GST.”
there were no provisions of taxation earlier. around 5 billion rupees, However, GST is applicable only if turnover
But with GST, the situation changed as it Surat produces 9 million or commission income is more than Rs.20
came like an imposition on the small and metres of fabric annually lakhs a year,” Jain remarked with a sigh.
medium-sized traders, recalls Priyank which accounts for 60% of
Gangwal, a Sari manufacturer at SK Textiles. Organised sector and their business
the total cloth (polyester)
“GST basically brought everything under the production in India. practises
eye of the government but, by force. Production
The situation was less complicated when it
of saris got reduced which ultimately led to a
comes to organised sector. As the name
decrease in sales in the market. Earlier 4 crore denotes, the sector was characterised by the
metres of processed saris were sold per day, but business became minimal due to the decrease organised groups which sustained due to their
now it has decreased to 1.5-2 crore metres per in purchasing power. “In addition, the payment business practises.
day,”- he exclaimed. windows for the purchases being made by the
buyers has increased to 120-180 days in Pavan Choudhary is a trader at Kay-Kay
Aditya Jain is the proprietor of a Textile
contrast to 90-120 days, earlier”, Jain added. International and works between the spinners
Agency and works as a commission agent. He
and weavers. They trade in the finished yarn
said, “GST is simply what we have to pay at too. According to him, the weaving sector was
every level of the transaction (Purchase and Increase in manpower requirements affected the most.
sales of goods and services). Also, GST is what and job opportunities
“Earlier 10k tonnes of yarn was sold, but
you have to pay on your expenses along with The rollout of GST had two effects on the now only 6k tonnes is sold. This was because
the existing Income Tax. sector. Not only did it resulted in a shortage of

22 | UNLEASHED | 2019