Start-Ups, Small Businesses Working Overtime To Comply With GST Regime
With the Goods and Services Tax (GST) just a few hours away from its midnight launch, start-ups and MSMEs (micro, small and medium enterprises) are burning midnight oil to prepare for the new tax regime. While some are prepared, others are grappling with the changes and most are overwhelmed with the scale of bookkeeping work that will be required.
Representative image. Image: Reuters
New Delhi: With the Goods and Services Tax (GST) just a few hours away from its midnight launch, start-ups and MSMEs (micro, small and medium enterprises) are burning the midnight oil to prepare for the new tax regime. While some are prepared, others are grappling with the changes and most are overwhelmed with the scale of bookkeeping work that will be required.
Shashank Agrawal, partner at Chartered Accountant firm DD Agrawal & Co, said the first thing MSMEs have to concern themselves with is the compliances under GST. “There will be monthly compliances, because they will have to file monthly returns.
But there will also be daily compliances because invoices will have to be reported every day. If they fail to do so, they won’t be able to claim input credit. There will be a maintenance cost and reliance on technology will increase.”
Some in the MSME sector are well prepared for the monumental changes. “We have been preparing for GST for two months now. We sat down with our CAs and cleared everything. As a sports goods manufacturer, we first found out which of our products are in which slab. All outdoor sports equipment, like footballs, will fall within the 12% slab and indoor equipment, which includes gymnastics and fitness equipment, is in the 28% slab,” Ambar Anand, director of Meerut-based Nelco Sports, said.
He added, “For the first couple of months, sales will be affected. So we have to deal with that. We are one of the few companies in Meerut’s sports goods sector that is organized in this manner. Most function out of small premises in the city and may not be able to afford an accountant. Unlike most people, we have been able to ensure that all our vendors are also registered under GST.”
But not every sector has clarity over slabs and other compliance issues. Vibhor Mathur, co-founder of Delhi-based educational start-up Project Aawaaz, said, “I have been hearing contending reports about our slabs. We are only a two-year-old company and haven’t been able to hire a full-time CA till now. But I think the time has come for us to do so. Besides, our company has two verticals. One is non-profit and the other is for-profit. We have to maintain books for both separately. Our annual turnover is below the Rs 20 lakh mark but we still have to pay GST since we render services in different states. We need clarity on this and much more.”
Every start-up has to grapple with peculiar problems of its own. Aditya Prasad, Chief Evangelist of Bengaluru-based Fintech (financial technology) start-up Perfios Software, said, “The first problem we are facing is that some of our clients have asked us to revise all our invoices for the month of June and hold them till the dust settles on GST. It delays payments and that means my revenue stream dries up. For a small company, it can be hurtful in the short term. In terms of the paperwork, our work has increased more than others. Since we work in the financial sector, our clients are very particular about the paperwork. We spent all of June doing paperwork.”
Mohammed Gulzar Khan, a godown owner in Hapur, said following up with all his clients and vendors over invoices may prove to be a nightmare. “I have three godowns in Hapur and we have material coming in from all over the country. The uncertainty is too much. Some states, like Jammu & Kashmir, have not yet implemented GST. How will that work? Nobody has told us anything. Demonetization has already broken our back. Leather storage took a hit after UP government cracked down on cattle slaughter. The government has the power to reform the tax regime but they should have at least spread awareness among traders. We have been thrown into the deep end.”
But all the anxiety and hardship now, Agrawal said, will lead to greater transparency in the long run. “This is, undoubtedly, a move towards a more transparent economy. What GST does is that it puts the entire supply chain in the open. Everything, from beginning to end, will be accounted for.”
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