Lit­tle In­dia strug­gles with tax rev­o­lu­tion

Kuwait Times - - BUSINESS -

In­dia has vowed that a new na­tion­wide tax will trans­form the econ­omy by bring­ing more busi­nesses into the dig­i­tal sys­tem and fill­ing state cof­fers, but for shop­keeper Sanjay Ku­mar Rai, who has never used a com­puter, the tran­si­tion is ter­ri­fy­ing. Rai is one of hun­dreds of thou­sands of small traders fear­ful of the goods and ser­vices tax (GST) launched Satur­day that aims to cre­ate a sin­gle mar­ket in place of a labyrinthine sys­tem of more than a dozen na­tional and state levies.

Un­der the new regime, busi­nesses must regis­ter with the GST net­work and file in­voices and tax re­turns on­line at least once a month. Prime Min­is­ter Naren­dra Modi has com­pared the changes to get­ting used to a new pair of eye glasses. Min­is­ters say there will be teething trou­bles but In­dia's army of small business own­ers like Rai are in a dig­i­tal panic.

At his shoe­box-sized sta­tionery store in cen­tral Delhi, Rai care­fully notes down all sales in a tra­di­tional thick ledger book in Hindi. He has no lap­top and says he would not know how to use one if it was placed in front of him. "I'm un­e­d­u­cated," he told AFP. "I don't know English. I only know Hindi so how do I nav­i­gate this new sys­tem?" Till now he has made all tax re­turns on pa­per.

In the­ory, traders like Rai with an­nual rev­enues of less than two mil­lion ru­pees ($31,000) do not need to regis­ter on the GST net­work. How­ever, the big­ger clients which buy pa­per and pens from him want sup­pli­ers to be in the GST sys­tem or they will go else­where. The govern­ment is press­ing for proof of all sales, re­gard­less of size, so that it can go af­ter tax cheats. An­a­lysts say the GST has been set up to force com­pli­ance in a coun­try with a poor tax base and a rep­u­ta­tion for avoid­ance. "It's a very clever sys­tem de­sign," Credit Suisse man­ag­ing di­rec­tor Neelka­nth Mishra told AFP. "There will be an au­to­matic com­pli­ance up­stream be­cause it's up to the com­pa­nies to en­sure that all their sup­pli­ers are GST com­pli­ant."

In Rai's case, an ac­coun­tant client came to his res­cue and com­pleted his on­line reg­is­tra­tion. But the shop­keeper is still not con­fi­dent about fil­ing monthly re­turns un­der the new sys­tem. "They take out a new law and then we small peo­ple have to find a way to fit in it," he said. He is not the only one worried about the mas­sive changes rip­pling through In­dia's econ­omy.

Thou­sands of traders across the coun­try closed their shut­ters on the day be­fore the launch to protest against the tax. Vi­jay Prakash Jain, sec­re­tary gen­eral of the Bhar­tiya Udyog Vya­par Man­dal, a na­tional traders as­so­ci­a­tion, was among those sup­port­ing the strike. "The rules and reg­u­la­tions are com­pli­cated and hard-hit­ting and we, es­pe­cially small busi­nesses, can never com­ply," he told AFP. "Ear­lier we filed re­turns once a quar­ter but now we have to file three re­turns a month and that's 37 in a year," he said. "Plus the govern­ment wants ev­ery­thing done on­line. Less than two per­cent of the coun­try's 60 mil­lion traders may have com­put­ers. Where is a small trader go­ing to get a com­puter from?"

Bhar­tiya Udyog Vya­par Man­dal has asked the govern­ment to re­duce the fil­ings to once a quar­ter and to let busi­nesses file man­u­ally. Rul­ing BJP party chief Amit Shah said this week­end that changes could be made to the tax law. Rat­ings agency ICRA said the tran­si­tion would re­duce the com­pet­i­tive­ness of the in­for­mal sec­tor in fa­vor of or­ga­nized business. "Nev­er­the­less, higher com­pli­ance is ex­pected to boost the tax base and the rev­enues of the cen­tral and state gov­ern­ments over the medium term," it said. —AFP

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