Hyderabad: Small business owners from the city are up in arms against a recent rule passed by the Goods and Services (GST) Council with regard to input tax credit, which has become a major obstacle to them. They said the rule, though introduced to prevent evasion, leaves them at a disadvantage when compared to bigger players.
The complicated new rule makes it practically impossible to file monthly returns without an accountant, they said.
The rule requires businesses to match the purchase invoices for monthly return (GSTR-3B) with details of the same invoices provided by the corresponding vendors (GSTR-2A). Earlier, there were no restrictions and businessmen could file for input tax credit based on self declarations of invoice.
It may be recalled that there have been many cases of tax fraud by businesses that uploaded fake invoices to claim input tax credit. The new rule, introduced in October, was considered necessary to prevent tax fraud through this route.
Alok Agarwal, a city-based chartered accountant specialising in indirect taxation, explained that the new rule had collateral damage.
He said small businesses cannot afford to hire full-time accountants to process the documentation every month.
“The biggest impact I have personally seen on many of my own clients is that the big players are not placing orders with small-time vendors, afraid that they wouldn’t be able to process the documentation in time. The big players are afraid that if the vendor doesn’t upload his invoices in time, they won’t be able to claim the corresponding input tax credit for that month. There are very few examples of rules that hit small businesses in such a bad way,” he said.
The example of Raghav, who owns an interior designing and manufacturing company, serves as an illustration to this problem. “Every month, since these changes, we have had trouble from smaller vendors. They simply don’t upload their bills and that is a huge deal for us. If they don’t upload, we have to threaten to stop payments,” he said.
Many small business owners claim they do not know much about the rule change. However, all of them were paying between Rs 6,000 and Rs 10,000 a month to an accountant to file GST returns for them. Some of them were willing to do it on their own until recently but eventually bit the bullet and hired an accountant.
Mr Siddhanth, who runs a fabrication workshop near Jeedimetla, said, “Until a few months ago, I filed the returns on my own. But the rules keep changing every few months. It is overwhelming. I hired the cheapest accountant I could find. My business has been slow for the past two years and the margins aren’t that great. But I had no option but to hire an accountant to file returns.”
Interestingly, small business owners (with a turnover of less than Rs 5 crore) have been given the option to file their GST returns quarterly. However, in order for them to do business with bigger players who want to claim input tax credit every month, they have to file the returns every month.
“They are forced to choose tax compliance at the cost of their business,” said Mr Agarwal.
