Every month, after 15th, every supplier gets after its principal to have their payments so that they can meet liquidity targets for – GST payments. Specially in the services sector where the service tax has given way to (mostly) 18% tax slabs, the taxation is higher than the profit margin in many cases, but what hurts is the requirement of paying the tax upfront every month without collections.
In services sector things are especially bad for the entrepreneurs. Sunny Singh (name changed) who started producing short web series for larger production houses says that his problems stems from the fact that he has to pay GST within a month after raising the invoice while the client payments lags by two to three months.
Sunny says “Its not like we can enforce terms of trade being the smaller party or that any court is waiting to hear our penal clauses for late payments”, “we just have to manage our liquidity – at times from our own personal accounts at other times with the help of loans from friends and family”
Another advertising professional (name withheld) who heads a medium size business for adserving says that her office was raises by tax officials at 8 PM and she was forced to explain her business model till 3 AM. What the tax officials didn’t understand was the fact that her margins were with 2% of her turn over and even then, the payments were delayed making it impossible for her to pay her GST obligations in time.
While good on paper the laws are actively discouraging tax compliance on ground for the liquidity crisis they are bringing in. In the environment of slowing growth, the payment delays are a common news to any one in any business. From Infrastructure to consumer goods, just nothing is moving fast enough for the liquidity to be maintained in the supply chains. Add to this the fear of default among banks and businesses across the country see GST as a problem.
With tax men knocking on the door and the payments from principal delayed, business communities may find their voice in next general elections in the ways most unpleasant to BJP