Economy

Small businesses move to towards formalisation

Suresh P Iyengar Mumbai | Updated on July 01, 2020 Published on July 01, 2020

The tumultuous roll-out of GST has slowly started to sink in among small and medium companies besides incentivising them to do their business formally despite facing many challenges.

The government has not only allowed small entities with less than ₹5 crore of annual turnover to file quarterly returns but also eased the entire process of filing their accounts.

The country has about three million SMEs contributing to almost 50 per cent of the industrial output and 42 per cent of exports.

Rahul Mehta, Chief Mentor, the Clothing Manufacturers Association of India, said many suppliers and manufacturers have entered the formal segment due to reasonable GST rates and quick resolution of most issues. However, he said the industry fears many companies might revert to their old way of doing business if government increases the rates.

Kirti Shah, promoter, Textile World, which manufactures fabrics, said GST has streamlined the way the industry was doing business but due to the pandemic, businesses are passing through difficult phase and government should give some relief to MSME sector on the tax front.

PG Mukundan, Secretary General, Indian Agro & Recycled Paper Mills Association, said GST has been immensely beneficial to the paper sector which seeks input from different industries due to which it faced multiple taxes both at the State and central level. The multiplicity of taxes made operations complex. However, he said GST has not only bought ease of doing business but also rationalised cost of inputs.

GST has also enabled seamless movement of goods across the States and improved supply chain efficiency of the paper industry. Now the trucks are covering 15-20 per cent more distance than earlier so we are able to deliver faster, he added.

Since the cascading of taxes is removed and the Input Tax credit is available at each stage of the supply chain and that, the same has led to removal of irritants in tax compliance from manufacturers to distributors to retailers, said Mukundan.

Vinod Simon, Executive Director, Simmco Rubber and Plastics, said after some teething trouble, the new taxation system has led to increase in efficiencies in the system. However, different rates for different products and raw materials within an ecosystem create complications.

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Published on July 01, 2020
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