Is the Opposition Right This Time? Are SMEs Overburdened after Demonetization and GST? With increasing documentation under the GST, many SMEs are finding it difficult to focus on productive work, being overburdened with the regulatory work of filing taxes

By Komal Nathani

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.


Terming GST as a badly conceptualized tax structure, Rahul Gandhi has recently accused Prime Minister Narendra Modi of making it difficult for small and medium businesses to even survive post demonetization.

While addressing the annual general meeting of the Punjab-Haryana-Delhi Chamber of Commerce, Gandhi said, "The government ignored all our suggestions on GST and introduced it with celebrations at midnight."

"Demonetization has crippled SMEs and has destroyed the unorganized sector, forcing workers to leave urban employment and go back to their villages, looking for MNREGA work," he added.

The young leader also spoke on how GST is only adding to the distrust with its flawed structure, forcing businesses to incur massive transaction costs that are destroying them.

Following the vitriolic speech by this vociferous opposition leader, Entrepreneur India contacted some SMEs to know how the owners are dealing with the changing norms.

"Can't Make Products Affordable Under This Tax Slab'

With increasing documentation under the GST, many SMEs are finding it difficult to focus on productive work, being overburdened with the regulatory work of filing taxes.

Owner of Bharat Floorings, a leading tile-manufacturing company, Firdaus Variava said, "The tax slab is 28% and is the highest so far. We would like to make our tiles affordable to everyone, but such a high tax rate has triggered a negative reaction among cost-conscious customers."

Variava added that the GST filing process is cumbersome. "And instead of benefitting us, it is increasing the company's expenses. We had to go on a fresh hiring spree for more manpower to deal with the additional work of filing of taxes," he added.

He said he has not noticed any change in the business operations following the implementation of GST, unlike the popular notion that the tax reform is supposed to ensure the ease of doing business. "I have no idea of what steps the Centre is taking to provide assistance to SMEs," he said.

Additional Responsibilities that Businesses Have to Handle Now

"One nation, one tax is unfortunately not the way GST has actually come into effect," said Srividya Kannan, Founder and Director of Avaali Solutions Pvt. Ltd.There is still a lot of confusion around GST, Kannan said and added, "GST is now completely online and working with this new system has not been easy. The IT infrastructure could have been tested better. This is causing us additional costs. The procedure/timeline for getting refunds on input taxes is not entirely clear yet."

GST has not ensured the ease of doing business, she said, adding there has not been any significant impact.

"It is actually a mixed bag. The CGTMSE scheme is a good move together with the increase in its cover. The SME sector needs more incentives as well as simpler and clearer guidelines to meet the regulatory compliances," she stressed.

"Doing Business Has, in No Way, Become Easy'

Mridula Shridhar, CEO of 25-year-old toy manufacturing company Kido Enterprises and co-founder of Skola Toys, spoke on how current tax regime has become cumbersome and how further changes will only to the difficulties in the overall functioning.

She said, "Even some of the chartered accountants are struggling to understand GST in a better way. Also, taxes at the highest rate of 28% on some essential items like wooden sheets (used in basic furniture) and paints is causing a lot of hardship for customers. With the implementation of GST, the prices of input raw materials have gone up."

Government is focusing on ways to avoid the additional procedures needed to start a new business, but not looking at how to make it easy for an existing business to run, she added.

Entrepreneur India connected with 40 other SMEs to know about their opinions on this, but they declined to comment.

Komal Nathani

Former Correspondent, Entrepreneur Asia Pacific

A firm believer of hard work and patience. Love to cover stories that hold a potential to change the momentum of business world. Currently, a part of all-women web team of Entrepreneur’s Asia Pacific edition to jig the wheel of business journalism!

Related Topics

Growing a Business

Free Webinar | October 24: Grow Your Local Business With These Low-Cost Marketing Tricks

Whether you're a small business owner, marketer, or entrepreneur, our exclusive webinar will equip you with the tools to connect with your community, boost engagement, and drive revenue. Register now →

Business Plans

10 Simple Tips to Write a Successful Business Plan

In the new book "Write Your Own Business Plan," business expert Eric Butow takes the anxiety and confusion out of planning and offers an easy-to-follow roadmap to success.

Growing a Business

Want to Sound Smarter? This Stanford Professor's Simple 3-Point Technique Will Help

With a little structure, you can impress audiences with your ad-libbing all day.

Starting a Business

16 Accelerators Designed to Fast-Track Small Business Founder Success

If you want to start up, level up, or scale up, look into these accelerator programs being offered by the big businesses on our Champions of Small Business list.

Personal Finance

5 Entrepreneurial Mindset Principles That Empower Financial Literacy

Adopting the right mindset is key to financial literacy. Follow these five guiding principles to enhance your understanding of wealth creation and growth.

Money & Finance

How to Make Money Online: 10 Proven Ways to Make Money Online

Need to know how to make money online as a side gig or new career? Check out this breakdown of the 10 top online money-making methods.