Aurangabad Channel Partners Confused about GST

GST is a brilliant move to check fraud and drive more businesses to the formal economy, but by taking it one step further and linking tax payment by a supplier, to the availability of Input Credit to the buyer, the beauty of the system completely breaks down. This is what the Aurangabad Channel Partners thinks.

The problem is the side-effects of cash flow, improper accounting, and reduced ability for people to trade with new suppliers and new customers - since there is uncertainty about the business outcome.

Under normal business circumstances, a transaction gets 'completed' when the goods/services are delivered, invoices received, and the payments made against them.

Talking to The DQ Week Pramod Dere, Cyber Peripherals says “ There is no sell out in the market as we are facing the lack of customers because at this point of time, no vendor wants to have stocked products. We are not getting any commitment for any vendor. It will be not wrong if I would say that the markets are confused about GST.

Rohit Maria, Accord Computers, says” Small Business typically suffer unevenness of cash flow. Even a simple one-week delay in receiving money for goods sold, throws their routine out of gear. ”

However, by the additional linkage of payment the beauty of the system breaks down. No longer can a business assume that the transaction is 'over' - and has to wait until 10 days after the return cycle (which is, 30th of the following month), to know whether they will be eligible to receive the Input Credit for the Tax they have paid.

Several market behaviors will emerge. Some will refuse to pay the Supplier until the 30th of the following month, leading to abnormal increase in working capital needs. Some will refuse to pay the tax portion - leading to multi-step transactions and increase in both working capitals needs as well as cost of doing business. Some will be asked for Bank Guarantees to cover the possible risks - and most SMBs will have no simple way to respond to such a demand.