GST to hurt unorganised sector: ICRA

Sanjeev Sharma

Tribune News Service

New Delhi, May 22

The implementation of Goods and Services Tax (GST) is likely to cause a shift in market shares leading to expansion of organised sectors in FY2018 at the cost of unorganised sectors, according to ratings agency ICRA.

In its report, ICRA said the introduction of the GST is likely to reduce competitiveness of the unorganised sector. It said several short-term implementation challenges remain, which may increase compliance costs and raise working capital requirement for companies. Though tax rates on goods will now be common across states, which would reduce the compliance burden for businesses, the multiplicity of slabs for goods and services suggests the tax structure would remain complex.

In a major challenge for the Small Medium Enterprise (SME) sector, more returns need to be filed. ICRA said three returns would have to be filed monthly, by the 10th of each month, though a single return would cover CGST, UTGST/SGST, IGST and cess. Another annual return would need to be filed, bringing the total number of filings to 37. Moreover, state-wise accounts would need to be maintained and various returns must match. Overall, the compliance burden would increase to an extent, which may be particularly burdensome for the SME sector.

The report says taxes to be paid immediately upon supply as well as on advances. In contrast to the current regime, taxes would need to be remitted immediately upon supplying a good or service, which would increase working capital requirements.

India Ratings , in a report, said the transition to GST will disrupt the working capital cycle of businesses in the initial phase and thus, easy liquidity in the system is essential for two to four months.

It studied a sample set of 11,000 corporates and estimates that the input credit lockup for this sample could be around Rs 1 lakh crore of which about Rs 50,000 crore could be blocked for about two months which may result in higher short-term working capital requirement for businesses in the near term.

Northern states — Punjab, Haryana and Himachal— will see a major escalation in their GSDP rates with the implementation of GST, PHD Chamber of Commerce and Industry said. Gopal Jiwarajka, president, PHD Chamber of Commerce and Industry, said the implementation of GST would remove the cascading impact of taxes and levies on their inter-state purchases and would enhance their respective GSDPs by 2-3 percentage points. 

Rates ‘high’ for telecom sector 

The telecom industry, which is reeling under debt and downfall in the earning due to increasing competition, has expressed its dismay over the proposed GST rates and said would further pressure it. "We hail GST as an iconic reform, but are disappointed with the announced rate of 18 per cent," said Rajan S Mathews, Director General, COAI, the umbrella body of the GSM operators. "We had submitted to the government that consideration must be given to the present financial condition of the sector and any rate beyond the existing 15 per cent makes telecom services more expensive for the consumer," he said. TNS