This Authored – writeup is written by Nitesh Kumar, Chartered Accountant
The current PARADOX of the Indian economy is only due to ongoing shutting down of MSMEs and SMEs units and shifting of production from these units to Big Corporate house.
Informal and unorganized sector economic data is not taken for GDP since majority of them are like one man army so they don’t bother about adhering standard data processing. They file their business Income tax return on presumptive basis and don’t bother about accounting and data processing. Accordingly data of these small units are not available for compilation so business data of these units cannot be plugged in GDP.
These unorganized sector generate 70 % employment and keep our economy alive through mass consumption of FMCG goods and other durable/nondurable products.
After surviving from demonetization and lock down GST law related with input is forcing these small units to shut down their business. Under GST Law you can’t revise GST return so if the accountant has made mistake and increased your liability in GSTR 3B you have to accept liability and pay. You can’t revise and can’t rectify.
You cannot take input credit if it is not reflecting in GSTR 2A/2B even you paid GST to Vendor. Now this kind of law needs professional data processing and cross check system.
Small business man can’t afford these kind of compliance cost so they are still continuing with raw skill employee, who are filling their GST return with various mistake.
Mistake are taking place, since you can’t revise return so financial hardship is being faced by business man in following two ways:
- GST Input is being blocked which leads to loss in business.
- Demand Notices is being raised for clerical mistake in GSTR 3B since it cannot be revised.
After Demonetization and COVID pandemic, Business man were expecting financial relief from Government, instead GST input is being blocked for uncontrolled reason which is creating survival risk. Shutting down of small units business is like blessing in disguise for organized sector, production of these small units shifted to organized sector which were struggling to survive during lock down.
Shifting of production from informal sector to formal sector is not an economic activity which is giving any marginal/additional value to GDP , this production shift will mislead the country by showing increase in GDP on the contrary the shutting down of informal sector units will reduce JOB at mass level .
Production shift to formal sector will give major boost to revenue and profit to listed company also so Sensex will increase. This is actually making capitalist economy where money will concentrate in the hands of few industrialist and at macrolevel poverty will increase.
If same capitalist mindset continues for more time Government and Industrialist both will be at losing end. Due to closure of SMEs, unemployment will increase, poverty will increase in long term purchasing power will reduce drastically and deep recession will take place slowly, these industrialist will face heat and struggle to survive during that recession.
For government due to unemployment and poverty people will start to react and in long term Government will also start losing confidence among people. Government and industrialist both need to understand the business eco system and cycle of MACRO economics.
Now the problem is who will make understand TO GOVERMENT that making business life easy for these small units will create job and increase demand and that will be real increase in GDP . Actually in the name of ease of doing business compliance adherence and GST has paved the way of Ease of dying business.
Psychology of money and power always make people to feel that they are most intelligent and visionary. They don’t listen the experts of subject and roam in own fantastic world. This phycology has made many big leader and business man to bite the dust.
It’s the matter of country, if obsession to bring economy to main stream is not controlled then damage to economy will be irreparable for long term. The economic decision maker of our country need to sense the suffering of millions of people and strike the balance between capitalist mindset and democratic values.