GST laws are slated to be brought into effect from 1st July 2017. Long innings of Central Excise laws since 1944 virtually comes to an end on that fateful day though that law will remain on the statute book for some more time. Those of us who were connected with the Central Excise (CE) in one way or the other cannot but feel that of all the tax collecting Departments, CE was the most people-friendly department.
Of course, a tax gatherer can never be a popular chap. But he can be people-friendly within the framework of law. That fact has been proved by this humble servant of tax laws called the “Central Excise Man” in this country. Let it be.
GST laws exempt a person whose annual turnover is less than Rs. 20 lakh from registering and from paying GST. They are prohibited from collecting any GST from their customers in their bills. On the face of it, it looks like it is a boon to millions of small traders and manufacturers including the suppliers of services.
However there is a glitch. There is a provision in a GST law that any registered person who buys goods and services from these exempted unregistered persons will have to pay the appropriate tax on the goods & services so bought. Thus these registered persons who buy from the exempted unregistered persons are compelled to determine different rates of tax applicable to many items they buy from the unregistered persons, pay the tax and reflect them item wise in their monthly returns which are already voluminous.
Therefore, a question naturally arises in the minds of the registered persons why they should buy items from unregistered persons at all and subject themselves to all the troubles and expenses arising out of such transactions when they can buy their requirements from registered persons who mention the exact tariff, item number and appropriate tax paid etc., in their invoices and also enable the buyer take input-credit of taxes paid which they can use for paying tax on their final products. Therefore, they will naturally stop buying from exempted unregistered persons. Instead, they will buy their requirements from registered persons only.
Thus millions of small traders/small units for whose goods and services the registered persons were the main customers hitherto, will lose those customers on whom they were dependent for their livelihood. In many cases they may have to close their shop ( I am one such person being a self-employed person running a tiny unit depending entirely on the purchases by those registered persons/units).
Now, the time has come for Government to protect the interests of millions of such small and tiny units owned by exempted unregistered persons which are on the verge of facing extinction on account of GST laws (vide Section 9(4) of CGST Act and Section 5(4) of IGST Act.)
The Government should delete the provision that require the registered persons/units to pay the tax on goods and services purchased from the exempted unregistered persons.
– K.A. Srinivas, Saraswathipuram, 20.5.2017