One GST, 5 Slabs: Small Businesses Still Struggling to Make Sense of 'Good and Simple Tax'

New Delhi: The idea that was sold as the big tax reform, one that would replace the outdated multiple-tax regime with ‘One Nation, One Tax’, has left more questions than answers for small traders across the country.

As News18 travelled across the country to assess the impact of GST on small and medium businesses, it found cycle manufacturers grappling with multiple GST slabs, met people working in brass industry wondering why yellow-coloured bells were not in the same slab as silver-coloured bells.

The exercise that was started to simplify taxation for India’s industries seems to have tied manufacturers up in knots. So much so, that small-scale businessmen like BR Durga have been pushed to near-bankruptcy. Micro-ancillary units have suffered a massive blow due to their inability to understand GST.

Durga is an owner of one of those micro units that are close to being shut down. He has no orders from larger manufacturers because he cannot afford to hire a chartered accountant to handle GST inclusive bills.

“We were first hit by demonetisation and before we could recover, the government has imposed this devil-tax on us. We don’t understand government’s intentions. And because of these big changes now we are being forced to spend huge sums, out of our working capital, on hiring CAs,” said Durga.

But some haven’t been able to make sense of this tax reform even after hiring CAs.

“We are unable to grasp what is GST. There is too much confusion. Even our accountants are unable to fully comprehend it. Small manufacturers like me are the worst hit,” says Rajinder Singh Sarhali, a cycle manufacturer in Ludhiana.

The exercise of simplifying the old tax regime has hit small traders the hardest. Take for instance, those in the cycle industry.

Different raw materials that go into manufacturing bicycles have been categorised under different codes. As a result, a manufacturer has to purchase raw materials at different slabs and he sells the finished product at a different GST slab.

Cycle- Its 28 % GST to get the cycle painted, 12% GST on other cycle parts, 18% GST on the Cycle lock, 5% GST on the tyre - and on this finished bicycle that you and I purchase- there is a 12% GST- It is this ambiguity of multiple slabs that is confusing the small scale traders.

“It would have been far simpler if the government would have categorised one sector under one slab. We have to allocate a lot of our time and resources at calculating our GST on sale and purchase of items under GST,” says Avtar Singh Bhogal, Chairman, Ludhiana Cycle Manufacturer Association.

Just like cycle manufactures, the badminton manufacturers in Jalandhar face a similar difficulty. Their purchase involves multiple slabs of GST and their final product is sold at a different slab. The gap has to be paid to the government every month.

The Badminton string which is made of plastic attracts 18% GST, manufactuer must pay 28% GST to get the racket painted, 18% GST is imposed on badminton frame made of aluminium and finally the complete Badminton Racket is sold at 12% GST at retail shops.

“We purchase raw materials by paying a higher percentage of GST and we sell at our items in a lower GST slab. This difference is paid to the government. Three months after its introduction there still is no clarity on new taxation among most manufacturers and suppliers,” said Shyam Sundar of JJ Jonax Sports.

Just like their colleagues in Punjab, manufacturers in UP seem equally, if not more, hassled by the new tax regime.

According to Azam Ansari, Chairman, Moradabad Karkhanedaar Association, Moradabad’s brass industry is not only facing losses worth crores of rupees but is also losing its world-renowned artisans.

Brass industry has an annual turnover of around Rs 20,000 crore and according to some estimates, business has gone down by as much as 50%, and because of it around 5 lakh artisans working with this industry are feeling the heat of GST.

“The cost of raw material has gone up and the demand for our product has gone down. We only work 2-3 days in a week now,” says Dilshad Hussain, an artisan who resides in Moradabad’s Katar Shaheed locality.

Manufactures say that customer don’t want to pay the additional GST on products. And they claim that GST slabs defy logic.

“Why is a small-sized brass pooja bell exempted from GST while a big brass pooja bell comes under 18% GST slab. It becomes difficult to explain this to a customer,” says Munna Ahmad, a worker.

He goes on to add, that what further confuses the customers and manufactures is the fact that a silver-coloured brass decorative is put under 18% bracket while yellow-coloured brass bell comes under 28% GST slab.

Cycle- Its 28 % GST to get the cycle painted, 12% GST on other cycle parts, 18% GST on the Cycle lock, 5% GST on the tyre - and on this finished bicycle that you and I purchase- there is a 12% GST- It is this ambiguity of multiple slabs that is confusing the small scale traders.