Its a changing time and every chartered accountant and account professionals are busy to find out information about GST. Rumour market is on high level. Some news are true and some are false. It is not easy for anyone to clarify his wording about Goods and Service Tax (GST). Our account consultant is also not assure about what gst will bring with it. But he has few facts that are going to be shocking for market.
Related post: What is Goods and Service Tax (GST)? GST rates for Pharmaceutical/Ayurvedic/Nutraceutical Products
How to generate e-way bill under GST?
In GST, every firm and company is going to be submitted its all record. Record means generally Stock in hand, Credit in market, Debit in market, sale, purchase etc. If you are a good firm. File return regularly, pay actual tax and have stock matched with your books, then you don’t need to take any tension. If you don’t have loan, tax and stock ratio as per your books then you may be in trouble for next few months. Due to GST, businesses have started to give discounts to clear remaining stock.
Have a look, what could happen if we don’t have proper books maintenance. Suppose we have back credit limit of one crore but our books are showing stock of 20 lakh with 10 lakh credit in market. Total of 30 lakh investment proof, we have in hands. We file return regular with showing 10% profit every year. In that condition, how a business will justify remaining amount investment. If we show more stock then we have to show more purchase and that we will not available at that time. Where 70 lakh of business credit limit ( Loan) has gone. This would be the story of every small and micro scale industry. In India, It is major problem. Business money doesn’t get invested into business. That is invested either in property or in car or other things.That’s why 90% of small and macro scale businesses will face this type of problem. It will down credibility of business in eyes of bank when business will move for more investment by bank.
Another problem is opposite to it. Suppose we have started a business with 10 lakh investment by taking loan and show it in our initial books. Now we have 20 lakh stock and 10 lakh credit in market. We show similar 10% profit in our business and turnover of 40 lakh annually. In 4 lakh annual income. No further chances of investment in business after deducting personnel expenses.
We are doing business from last 4 years. How we will justify the investment.
These two problems is not so easy to face as it seems. Its going to be tough time for many companies in pharma sector as well as other sectors. It could be next demonetization. Demonetization at Tax.