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Impact of GST on small businesses

Goods and Services Tax (GST) was introduced in India on July 1, 2017. A move to simplify the tax system, it has also had negative impacts on the small businesses.


The hardest part has been to understand the GST structure. Claiming to ease out the tax system, it ended up becoming complicated for businessmen. Small players who cannot afford to hire a CA have been almost pushed into bankruptcy because they couldn’t fathom the nitty gritty of the new tax system. Some of them who can have been churning out a huge amount of money from their pockets for it. As per a report, a CA charging INR 2,000 per month raised the fee to INR 6,000 after the implementation of GST.

Diwali 2017 saw the small vendors being worst hit by GST. Since customers had a preconceived price tag in mind for crackers, lights, holy items etc., they refused to pay an additional GST on them. So much so, that they even refused to enter the shops and bargain. This left many small businesses in a lurch.

A similar sorrow struck the unorganized sanitary ware makers. The INR 3,500 crore sanitary ware market consists of INR 1,800 crore unorganized segment. Cash crunch led to closing down of a majority of them. The fact that the GST was a 2% increase from the previous tax imposed on the same didn’t help either.

The government recently released INR 8,698 crore to all the states and Union territories with a legislature. The money was released as compensation for revenue losses incurred during July-August on account of implementation of GST.

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