NO EASE OF BUSINESS FOR SELF EMPLOYED AND SMALL ORGANISATIONS- GST WILL MAKE LIFE DIFFICULT
By: – DEVKUMAR KOTHARI
Goods and Services Tax – GST
Dated:- 20-6-2016<\/p>\n
Ease of doing business:
\nGovernment 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.
\nNo ease of doing business for small supplier and service providers
\nAs 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.\n<\/p>\n
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\nFor 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.
\nA 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.
\nIncome element:
\nEarning 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.
\nNE Region:
\nNE Region is itself a difficult place to live and work. The limit of ₹ 4 lakh is not at all ju<\/p>\n
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\nIn 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.
\nTherefore, threshold limit for liability for registration and GST payment need to be revised.
\nPresumptive income-tax- a basis:
\nEven 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.
\nA person earning ₹ 40K in NE & Sikkim annually and ₹ 80K in other states should not be burdened with formalities of GST.
\n8% net profit is not feasible in case of small suppliers and service providers because for achieving breakeven itself, a turnover of 15-25 lakh is required. Only after achieving break even one derive net profit.
\nEstimation of income vis a vis turnover \/ gross receipts:
\nIn case of supp<\/p>\n
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\nIn case of supplies:
\nTurnover required for break even i.e. 18,00,000 + (2,50,000 \/ 10%) = 43,00,000\/-
\nIn case of services:
\nTurnover required for break even i.e. 12,00,000 + (2,50,000 \/ 15%) = 28,66,667\/-
\nBefore these levels there is hardly any scope to earn taxable income.
\nThe assumed rate of GP is on higher side and fixed expenses are on lower side.
\nRequirement of Tax audit u\/s 44AB:
\nAt 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 inflation and to reduce compliance cost and make business easy.
\nUP ward revision of thresh hold exemption for GST is required:
\nThere is no justification of burdening with GST requirements such small traders and service providers who are not even able to earn income which enjoys basic exemption.
\nIn case of NE and Sikkim about half of normal exemption limits has also no justification because in th<\/p>\n
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\n7. Charges for sales tax lawyers for filing of 4 qtr returns, and one consolidate audit return annually, assessment of the cases.
\n8. Audit charges.
\n9. Filing of income tax returns.
\n10. Day to day Office running expenses
\n11. Printing and stationery
\n12. Telephone charges.
\n13. Repair and maintenance
\n14. Other miscellaneous.
\nConsidering 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.
\n Dated: 21-6-2016
\n Reply By Gautam Singh as =
\nDear Sir,
\nI have read your article. It seems that, it is politically motivated.
\nYou stressed much on the threshold limit for the registration which is ₹ 9 Lacs. Currently, almost all State's VAT have the threshold limit even below 9 Lacs. What about Sikkim, where current threshold limit for VAT registration is ₹ 3 Lacs.
\nYou have analyzed the financials of Rickshawala, Panwalas, Barbers etc. in detailed. But, are they register<\/p>\n
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