A Study on the Impact of GST on Small Scale Traders

International Journal of Economics, Commerce and Research (IJECR) ISSN (P): 2250–0006; ISSN (E): 2319–4472 Vol. 10, Issue 1, Jun 2020, 93–100 © TJPRC Pvt. Ltd.

A STUDY ON THE IMPACT OF GST ON SMALL SCALE TRADERS KHULOOD KALOKHE1 & B. S. PANDEY2 1

Assistant Professor, Rajiv Gandhi College of Arts, Commerce & Science, Vashi, Navi Mumbai, Maharashtra, India 2

Principal, Rajiv Gandhi College of Arts, Commerce & Science, Vashi, Navi Mumbai, Maharashtra, India

ABSTRACT The inception of Goods and Services Tax (GST) is a watershed in India’s taxation regime. The implementation of GST made the year 2017 as the most striking year for India since independence. This year will perpetually be embedded in Indian annals as the transitional year that has seen the enforcement of an epoch-making and indispensable restructuring of the Indian economy since Independence - the Goods and Services Tax (GST). The amelioration that took 17 years of intense war of words was eventually put into action and GST Law came into force. The proposed study is designed to know the aftermath of GST on small scale traders in India. The primary objective of the study is to analyze the post implementation effect of GST on small traders. The data for the study is collected from primary sources and secondary sources.

The research deduced that GST may poise to be the solution to all the problems of the small traders. With the

change.

KEYWORDS: GST, Small Traders & GST Council

Received: Oct 21, 2019; Accepted: Nov 11, 2019; Published: Feb 06, 2020; Paper Id.: IJECRJUN202013

INTRODUCTION

Original Article

changes being brought on with each GST Council meet, the on-ground sentiment among traders has taken a positive

The inception of Goods and Services Tax (GST) is a watershed in India’s taxation regime. The implementation of GST made the year 2017 as the most striking year for India since independence. This year will perpetually be embedded in Indian annals as the transitional year that has seen the enforcement of an epoch-making and indispensable restructuring of the Indian economy since Independence - the Goods and Services Tax (GST). The amelioration that took 17 years of intense war of words was eventually put into action and GST Law came into force. This tax subsumed all indirect taxes that previously existed in India levied by the Central and State. As the GST journey makes headway, there was a snowballing cognizance in the aftermath impact of GST. The Small and Medium Enterprise (SME) sector is adduced as the cornerstone of the Indian economy. They are the small indispensable part of a luxurious automobile which help the engine to run smoothly. Since SME’s constitute an integral part, the footprint that SMEs have on our economy is immense. While GST in the short term could be a mixed bag for small scale trader; in the long run it might prove to be value accretive for the SME sector. Let’s walk through some of the highlights: •

Simpler to roll out new Start ups

•

Reduced logistics cost

•

Reduced tax burden

•

Enhanced compliance

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Khulood Kalokhe & B. S. Pandey

REVIEW OF LITERATURE In order to get better insight of the study, review of literature was done for better understanding. Some of the reviews are given below: Shah (2014) fore grounded the aim of propound GST and conferring the credible challenges, menace and all possible contingencies that it will bring before is to reinforce our Indian economy.

Milandeep Kour (2016) infer that GST plays a pro-active role, making headway of our country.

Saurabh Suman (2017) concluded that GST rollout will snarl up furthermore the footprint on Small and Medium Sized Business throughout several line of business will differ substantially. In a country like India, it is natural to have mixed opinions towards GST. Dr. V. R. Nedunchezhian (2018) accentuated in the paper from the survey conducted, it is manifest that the respondents adjudged in the aftermath of Goods and Service Tax as an equipoise and there is feasible ambit for amelioration in the course of action.

OBJECTIVES OF THE STUDY •

To juxtapose the issues of previous and current indirect taxation system.

•

To examine the post implementation effects of GST on - Overall expenditure of the traders, prices of goods and services and working capital requirements

Importance The study gives an insight into out-turn implementation of GST on small traders who are the biggest stake holders.

Limitations •

The study is limited to a particular area.

•

A small sample size is taken into consideration.

•

The study considers only the small traders.

RESEARCH METHODOLOGY •

The present study is a observational research. The data is collected from primary and secondary sources.

•

The secondary data collected is qualitative and quantitative in nature. It is collected from Journals, Magazines, Newspapers and Reports.

•

The primary data was cumulated from Mumbai and Navi Mumbai region.

•

For collecting the data, survey method was undertaken.

•

Random Sampling technique was used.

•

Sample Description: The data was collected from 100 Small Traders.

Impact Factor (JCC): 6.5424

NAAS Rating: 3.27

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Figure 1

Figure 2

Figure 3 Hypotheses •

H1: The GST has effectively solved the problems of old taxation regime.

•

H2: The GST has increased overall expenditure of the traders.

•

H3: Post GST implementation, profiteering by corporates has become prominent.

DATA ANALYSIS AND INTERPRETATION

Figure 4

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Khulood Kalokhe & B. S. Pandey

Post implementation of GST following problems are solved

28%

39%

42%

72%

61%

58% Yes

No

Problem of Red Tapism Problem of Multiple Taxes Problem of Hidden Cost

Figure 5 The traders in the old regime complained largely of the following: •

The problem of red-tape.

•

Problem of different taxes in different states.

•

The problem of Hidden Costs.

•

Multiple taxes leading to cascading effect However, post implementation of GST above problems has been overcome to some extent.

Thus, the comparative analysis of responses (as shown in chart above) proves our H1 i.e. GST has been

effective to a large extent in solving the problems existing in the old regime.

Effect on expenditure post implementation of GST

80% 60%

Remains Constant

40%

Decreased

20%

Increased

0%

Compliance Cost

Working Overall Tax Capital expenditure Requirement Increased

Decreased

Remains Constant

Figure 6 The traders have been complaining that their expenses have drastically increased post GST implementation.

Expenses in the following form have largely affected the traders. These expenses are -

Impact Factor (JCC): 6.5424

NAAS Rating: 3.27

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Increase in Compliance Costs due to increase in software cost, increase in return filing fees and increase in cost of accountants.

•

Increase in Working Capital Requirements due to reduced money flow in the market, compulsorily monthly tax payments, increased taxes and slack in the market.

•

Increases in Overall Tax Expenditure Thus, the comparative analysis of responses (as shown in chart above) proves our H2 i.e. GST has

increased the overall expenditure and working capital requirement of the traders

Post implementation of GST 100% 80% 60% 40% 20% 0%

Reduction in prices of commodities

Benefits passed to customers

Increased in Avaliablity of base prices of ITC has led in commodities reduced prices by corporates

Yes

No

Figure 7 The findings show that the traders haven’t been able to pass on the benefits of GST in the form of Reduced Prices to customers mainly because of Profiteering done by corporates.

Thus, an analysis of responses proves our H3 i.e. post GST implementation, profiteering by corporates has become prominent.

CONCLUSIONS •

The study concludes that while GST may be poised to be the solution to all the problems of the traders, it is not necessarily so.

•

While it may have substantially reduced the shortcomings of the previous regime, being a completely new law, it has also played a role in slowing down the current economy due to its effect on the trader’s day to day operations.

•

However, with the changes being brought on with each GST Council meet, the on-ground sentiment among traders has taken a positive change.

SUGGESTIONS •

Faster processing of refunds by the authorities will help reduce the working capital pressure on the traders.

•

Faster implementation of Anti Profiteering measures will help keep the corporate actions in check.

•

Improvement in GST infrastructure suggested in-order to enable fast processing of returns.

•

Simplification of compliance procedures suggested.

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REFERENCES 1.

Shah, Kumar (2014): “Goods and Service (GST) Tax in India: Challenges and Opportunities”, Global Journal of Multidisciplinary Studies, volume 3, issue 9.

2.

Yusri, Y., & Yee, K. (2015). Malaysian Taxpayers’ Perception towards the Implementation of Goods and Service Tax (GST).

International Journal of Economics (IJECR), 5(6), 1-8.

3.

N. Kumar (2014): “Goods and service tax in India- A way forward”, “Global Journals of multidisciplinary studies”, vol.3, issue 6.

4.

Singh, A., & Benjamin, R. A Comparison of Pre GST & Post GST Prices and the Overall Price Level Changes of Goods in India.

5.

Milandeep Kour, Kajal Chaudhary (2016): “A Study on impact of GST after its implementation”, International Journal of Innovative Studies in Sociology and Humanities (IJISSH), volume : 1 Issue: 2

6.

Berliandaldo, M., & Hidayat, A. (2017). Implementing Talent Management Approach, to Improve Non-Tax Revenue in Center for Innovation. International Journal of Business and General Management (IJBGM), 6(6), 47-56.

7.

Saurabh Suman(2017): “Study on New GST Era and its Impact on Small Business Entrepreneurs”, Journal of Accounting, Finance & Marketing Technology Vol. 1, Issue, 02.

8.

Dr. V. R. Nedunchezhian, Sridhar Babu (2018): “Analysis of impact of GST with reference to Perspective of Small Business Stakeholders”, International Journal of Pure and Applied Mathematics Volume 119

9.

Singh, A., & Benjamin, R. (2017). An Analysis of Price Forecast & the Price Level Changes Owing to the Implementation of GST in India. International Journal of Financial Management (IJFM) ISSN (P): 2319–491X; ISSN (E): 2319-4928 Vol, 6, 1-4.

10. https://yourstory.com/2018/08/gst-impact-indian-smes 11. https://economictimes.indiatimes.com/small-biz/sme-sector/gst-a-perfect-tool-for-smegrowth/articleshow/68125258.cms?from=mdr

AUTHOR'S PROFILE

Khulood Naseem Kalokhe, currently working as Assistant Professor in Rajiv Gandhi College of Arts, Commerce & Science, Vashi, Navi Mumbai, Maharashtra, India. She Completed B.Com M.com from ICLES’ Motilal Jhunjhunwala College of Arts, Science and Commerce, Vashi, Navi Mumbai. She also contributed in publish of more than five articles in various Publications and conference events.

Basukinath Shambhunath Pandey, currently working as Principal in Rajiv Gandhi College of Arts, Commerce & Impact Factor (JCC): 6.5424

NAAS Rating: 3.27

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Science, Vashi, Navi Mumbai, Maharashtra, India. He is Life member of Indian Commerce Association (ICA). He also contributed in publish of more than five Research in various Publications and conference events. He is also currently Pursuing his PhD from Department of Commerce in University of Mumbai. He Completed M.Com from K. B. P. College, Vashi, Navi Mumbai, Completed B.Ed. from Guru Nanak College, Bhandup, Mumbai & Completed B.Com from ICLES’ Motilal Jhunjhunwala College of Arts, Science and Commerce, Vashi, Navi Mumbai.

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