Online businesses bearing the brunt of raids by ill-informed officials
FIRST India organized a consultative roundtable, inviting representatives from Delhi, Haryana, Rajasthan, among others, to deliberate on the ongoing GST drive. Haryana in the recent times has turned to be an industrial hub for many small and medium enterprises. However, the current two-month campaign to weed out fake invoicing is hurting small and microentrepreneurs who use virtual place of business model to conduct their business.
The unintended consequences of these raids have begun to take a toll on the lives of the small and microentrepreneur community. Honest entrepreneurs, who have spent years building their businesses, are now dealing with uncertainty and financial distress. A jewelry businessowner from Jaipur said, “I have a small e-commerce business and all my documents and filings are in order. But ever since the GST drive has started, there is a sense of fear despite being an honest small business like myself, we don’t have the resources to handle such compliance requirements and we are afraid we will be penalized unwittingly which will bring our business to a standstill.”
Speaking on this, a chartered accountant said, “It’s challenging to explain why multiple registrations are necessary when the ‘one country, one tax’ principle was emphasized by the Hon’ble Prime Minister. This contradiction adds to their distress, especially when they have to register in multiple states with separate requirements and compliance procedures. For instance, in Haryana, officers demand separate electricity registrations for each entity, even though regulations allow multiple registrations on the same premise. This creates impracticality and inconvenience for small businesses. Additionally, the expectation of immediate availability during inspections is often not feasible. These hurdles hinder ease of doing business, particularly for small entrepreneurs who lack resources for tax consultants or lawyers.”
A small business owner from Delhi said, “As an online entrepreneur of mobile accessories across 5 states, I’ve been burdened with obtaining separate GST registrations for each state. However, a bigger hurdle arises when officers insist on in-person meetings at our different registration locations. It becomes impossible for me to be physically present in multiple offices simultaneously, and expecting my Chartered Accountant to be available at the beck and call of officers is equally impractical. To make matters worse, even when we manage to attend these meetings, our licenses are at risk of being canceled for minor oversights.”
Efforts should be made to establish a transparent investigation process and educate tax officers at the ground level about existing provisions, ensuring that the drive delivers on its intended purpose. Speaking on this, Vinod Kumar, President, India SME Forum, and Trustee and President, FIRST India, suggested “The special drive, if not implemented properly, can do more harm than good. These budding entrepreneurs use shared warehouse spaces for their registered address and pay taxes accruing from their businesses. The government could end up undoing some of the stellar work done with this raid. Every license cancelled takes lots of time for the business to re-start thereby losing its competitive edge and creating capital crunch.”
Mr. Radhey Shyam Sharma, Senior Vice President, Federation of All India Vyapar Mandal, said, “India’s regulations, although astutely crafted, often overlook the backbone of our nation — farmers and small businesses. GST and other laws stifle their growth, dissuading the next generation from entering the trade. While farmers can protest complex regulations, traders have to silently endure as they can’t abandon their shops. As an 88-year-old, I witness the destruction of small businesses. Traders receive punishment without reward, haunted by inspectors and officers. Compliance has become a daunting obstacle, deterring new generations.”
The impact of this special drive extends far beyond the confines of business, and its effects are long-term in nature. Many small businesses and enterprises rely solely on the income generated from online sales to support families, educate children, and meet basic needs. Additionally, businesses face the risk of losing the trust of their loyal customers, who may turn to other platforms that remain unaffected by the investigations.