Telangana low GST ceiling hits traders

Hyderabad: Mr Satyanarayana owns a shop selling hardware supplies and minor power tools in Chikkadpally. His turn--over is between Rs 20 lakh and Rs 25 lakh. His margins are thin; his gross profit is generally less than Rs 8 lakh. But he has to pay huge amount every month to an accountant to file his GST returns.

The stories of several small business owners in Telangana are largely the same. And their troubles are partly because of the state government.

It may be recalled that in January 2019, the GST Council meeting decided to raise the GST exemption limit for goods traders from Rs 20 lakh to Rs 40 lakh in big states (non special category states). However, two states — Telangana state and Kerala — decided to maintain status quo. This implies that any business with a gross turnover of more than Rs 20 lakh has to register in the GST network. Businesses in other states are spared the hassle of paperwork as long as their turnover is below Rs 40 lakh.

Registering in the GST network can indeed be quite a hassle. The complexity of GST laws forces the businessmen to hire accountants who can charge upwards of Rs 3,000 a month just to file the returns. Internal audits and other services cost much more. For many small businesses, these numbers can be overwhelming.

Mr Alok Agarwal, a chartered accountant specialising in indirect taxation, said the current GST regime was indeed taking a toll on small businesses. “Under the earlier VAT (value-added tax) system, the returns form was a one-page affair. The exemption limit was only Rs 5 lakh but businessmen could file the returns on their own. Today, GST returns are so complex that businesses need accountants like me,” he said.

Accountants seem to be having a field day thanks to the complicated nature of GST. “Earlier, many accountants would specialise in income tax or other direct taxes and not deal with indirect taxes at all. Today, they have started offering a new line of service because there is such a high demand for it,” said Mr Agarwal.
There is one other piece in this puzzle that makes it more confusing. The exemption limit of Rs 20 lakh is valid only in intra-state trade in goods. When goods are being traded between two states, the business owner has no choice but to register under the GST even if his/her turnover is just Rs 1 lakh. This can be quite expensive for many businesses that are starting out or expanding their operations.

Harshitha, who owns a small fashion boutique in Ameerpet, started her business in 2017. She has struggled to navigate complicated legalese. Though she declined to reveal her turnover, she said, “I don’t really understand GST. I have had to hire an accountant for documentation. It is quite expensive and makes for a considerable chunk of my income.”

Other small business owners that Deccan Chronicle spoke to had the same views.

Why the Telangana state government has not changed the exemption limit is anyone’s guess. Mr Pawan Bansal, the owner of a garments business and the president of Garments Manufacturers and Wholesalers Association (TS), felt it was because the TRS government and the BJP-led Central government weren’t getting along.

“It is the cost of paperwork that is a hassle. The difference in tax amounts won’t be much if the exemption limit is increased. The limit would have been changed in Telangana as well if the governments got along,” he said.

Mr Agarwal said the reason is hard to know. “Perhaps the state government wants to wait and see how the change in exemption limit affects tax collection in other states. It could take a decision in the future. Another reason could be the Telangana government’s desire to increase the tax-base. In any case, if all other states have changed the limit, there is no reason why these two states (Kerala and Telangana) should not. Having different limits defeats the purpose of a uniform tax code,” he said.