Goods and Services Tax – GST – By: – CA DEV KUMAR KOTHARI – Dated:- 20-6-2016 Last Replied Date:- 26-6-2016 – Ease of doing business: Government of India (NAMO government) is promising ease of doing business. However, feeling of business men is that doing business is becoming very difficult day by day. More formalities and obligations are being cast on businessmen – even on small self-employed people. No ease of doing business for small supplier and service providers As discussed hereafter even a rickshaw puller, / auto rickshaw, a barber shop , a pan shop, a small provision store run by self employed shop keeper, will be required to get registered under GST and pay GST. For example, even a self- employed small pan shopkeeper selling pan, cigarettes, and cold drinks can have turnover of Rs. three – four thousand daily with a net daily income of about ₹ 250- 300 will be required to get registered and pay GST. It is highly feared that e
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ven a small business has some fixed expenses on account of rent, interest, depreciation of assets, electricity, employee/ outsourced services cost, up-keep repair and maintenance of business space and machines, mobile and other phones, local taxes etc. For examples, even a rickshaw puller has to pay rent to the Rickshaw owner, rent for parking, repairs expenses for rickshaw, local tax, road tax etc. Now-a-days even a Rickshaw Puller is required to have mobile phone so that his passengers can call him and fix time for pickup. A barber has to pay rent for shop / space, they also have to pay some trade licence or similar fees to local authorities trade associations, repairs for shop and tools, consumable tools etc. Income element: Earning of income starts only when contribution from sales and services is enough to fully recover fixed costs ( including semi-fixed costs). Before break even point, there is no profit. NE Region:
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imits will be increased substantially to at least ₹ 20 lakh. However, the same remained unchanged and now in GST also same amount is kept with further substantial reduction for states in NE and Sikkim state. In various states also for Sales Tax / VAT the exemption limits ranges around Rs. ten to fifteen lakh per annum. And these limits also require revision. Therefore, threshold limit for liability for registration and GST payment need to be revised. Presumptive income-tax- a basis: Even if we apply presumptive net income computation Rule , at turnover of Rs. five lakh deemed income is ₹ 40000/- and on Rs. ten lakh it is ₹ 80000/-. These are far below basic exemption provided under Income-tax Act. A person earning ₹ 40K in NE & Sikkim annually and ₹ 80K in other states should not be burdened with formalities of GST. 8% net profit is not feasible in case of small suppliers and service pr
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e of services Rs.12,00,000/- Turnover required to earn taxable income: In case of self-employed people assuming a gross profit of 10% in case of trading and 15% in case of service the turnover required for earning income at least equal to basic exemption under Income -tax Act will be as follows: In case of supplies: Turnover required for break even i.e. 18,00,000 + (2,50,000 / 10%) = 43,00,000/- In case of services: Turnover required for break even i.e. 12,00,000 + (2,50,000 / 15%) = 28,66,667/- Before these levels there is hardly any scope to earn taxable income. The assumed rate of GP is on higher side and fixed expenses are on lower side. Requirement of Tax audit u/s 44AB: At present (for PYE 31.03.2017) Tax Audit will be required when gross receipts exceed ₹ 100 lakh in a business and ₹ 50 Lakh in any profession. These limits also need revision in view of infla
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kh For service providers ₹ 25 lakh The above are just half of limits prescribed for tax audit report u/s 44AB. – Reply By SANJAY MEHTA – The Reply = Now a days a normal business entity whose turnover is 40 lakhs annually needs following expenses to run his business at lowest smooth level.1. Rent of the shop. 2. Electric charges.3. Salary of the staff at least 2 nos.4. Trade licence fees both shop and Godown. 5. Profession tax.6. Accounting charges.7. Charges for sales tax lawyers for filing of 4 qtr returns, and one consolidate audit return annually, assessment of the cases.8. Audit charges.9. Filing of income tax returns.10. Day to day Office running expenses11. Printing and stationery 12. Telephone charges.13. Repair and maintenance 14. Other miscellaneous.Considering the formalities involved in GST, a small traders with a turnover of upto 80 lakhs will not have a taxable income in hand to pay an income tax. – Reply By Gautam Singh – The Reply
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