SME preparedness: GST fears loom on Punjab's small businesses

In concluding part, BS finds Ludhiana's garment & other small industries wary of changing tax reform

Gautam Jain, a cycle parts maker in Ludhiana’s Daba Road, has for years managed the daily accounts of his company. Every sale under the current system is done through a challan and invoices are made twice or thrice a month. His office attendant is able to write the details by hand in a challan whenever Jain is away. From July 1, all sales need to have a computerised bill with details such as the sellers’ and buyers’ goods and services tax network (GSTN) number and his attendant is not computer-literate. But Jain has found the solution in a new printer.

“I have spent Rs 15,000 on this printer to ensure that my business does not suffer. I can make the bill on my laptop even while I am travelling and my office staff can get the printout at the factory. That way my sales can continue seamlessly. I will manage without a full-time accountant because I cannot afford one,” said Jain, whose company clocks an annual turnover of Rs 1.75 crore. He has also updated his Tally software and it is ready for the GST. But his expenses on compliances will go up. The accountant who helps him on a part-time basis under the current system will now visit him more frequently to help him file the various GST returns. 

Ludhiana, in Punjab, is estimated to have more than 20,000 big and small manufacturing units. The city is known as a hub for cycles, garments, metal, auto parts, industrial machinery, etc. These units have their respective associations, which have tried to conduct seminars for their members on the GST.

The city’s Garment Machinery Manufacturers and Suppliers Association, which has about 140 members, spent Rs 65,000 on a Delhi-based chartered accountant (CA) for a five-hour seminar in early June. Ram Krishan, the association’s chairman and a trader of garment machinery, said: “There is little enlightenment even after attending such seminars, which are not able to go into practical details of the GST. We are groping in the dark. Whatever our CAs will ask us we will follow.” He says many orders were close to execution but they had to be put on hold temporarily.

Business Standard visited six Ludhiana-based manufacturers engaged in manufacturing garments, yarns, cycle parts, hand tools, etc. Those with a large export exposure and an annual turnover of more than Rs 25 crore seem to be more or less ready. Ajit Lakra, managing director of Superfine Knitters, says even if the industry had got more time, many would have not been fully prepared. “There is a tendency to resist change. The fabric makers have no tax at present and they now have to pay five per cent GST. The absence of tax, however, was a big anomaly in the chain of garment manufacturing,” said Lakra.

Traders are observing a three-day nationwide strike to protest the GST on fabric. Some are apprehensive that they will be charged exorbitantly by CAs in filing returns and meeting requirements. “There is a shortage of such professionals as of now,” said a trader.

Parash Jain, owner of Hem Knitwears, says there are different dos and don’ts given by CAs in the matter of the GST. “Many pieces of information are floating on WhatsApp groups of traders and manufacturers. These add to the confusion. Some are apprehensive if getting input tax credit will be a simple exercise.”

The relaxation on small businesses with a turnover of less than Rs 20 lakh from registration and paying the GST, some say, is also confusing. “Turnovers fluctuate every year. This provision will make some show a lower revenue even if it goes up to Rs 25-30 lakh,” said an industry executive. 

Sudershan Jain, president of the Knitwear & Apparel Manufacturers Association of Ludhiana, and also a garment maker, is happy that his consignment will not be stopped at different points before it reaches the final destination on some pretext or the other. “From July 1, every consignment will have a docket of information related to the product, quantity, value, etc. Nobody should be able to trouble us.”

The challenge with micro and small businesses is that these are mostly family-managed with a small or no professional staff. Many have relied on manual invoicing and have never owned a computer. “Such businesses, which are a one-man show, will face a tough time. But the GST is an opportunity for them to come into the mainstream and find growth opportunities,” said S C Ralhan, owner of Sri Tools, a hand tool maker and president of the Ludhiana Hand Tools Association.

Ralhan said from July 1 his company would not deal with raw material suppliers and finished goods buyers who had not secured a GSTN number because in that case he would not be able to claim input tax credit.