CA Nitesh Kumar is a seasoned professional. He has 15 years of enriched experience in the Virtual CFO domain. He has increased the profit of many SMEs and MSMEs through Business Process Reengineering. He provides customized business solutions and implements his own developed KPI for a continuous marginal gain in revenue. He has worked as GM (Finance) For Pacific Group. He blends corporate experience with birds-eye view skill to find bottlenecks of growth paths in the business cycle. His approach towards working capital management has helped a lot of SMEs in survival during Covid 19 pandemic.
The current PARADOX of the Indian economy is only due to the ongoing shutting down of MSMEs and SMEs units and shifting of production from these units to Big Corporate houses.
Informal and unorganized sector economic data is not taken for GDP since the majority of them are like a one-man army so they don’t bother about adhering to standard data processing. They file their business Income tax return on a 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 sectors generate 70 % employment and keep our economy alive through mass consumption of FMCG goods and other durable/non-durable products.
After surviving from demonetization and lockdown GST law related to 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 reflected in GSTR 2A/2B even you paid GST to Vendor. Now, this kind of law needs professional data processing and cross-check system.
Small businessmen can’t afford these kinds of compliance costs so they are still continuing with raw skill employees, who are filling their GST return with various mistakes.
Mistakes are taking place since you can’t revise return so financial hardship is being faced by businessmen in the following two ways:
- GST Input is being blocked which leads to a loss in business.
- Demand Notices is being raised for clerical mistake in GSTR 3B since they cannot be revised.
After Demonetization and COVID pandemic, Businessman was expecting financial relief from Government, instead, GST input is being blocked for an uncontrolled reason which is creating survival risk. Shutting down of small units business is like a blessing in disguise for the organized sector, production of these small units shifted to an organized sector that was struggling to survive during the lockdown.
Shifting of production from the informal sector to the formal sector is not an economic activity that is giving any marginal/additional value to GDP, this production shift will mislead the country by showing an increase in GDP on the contrary the shutting down of the informal sector units will reduce JOB at a mass level.
Production shift to the formal sector will give a major boost to revenue and profit to a listed company also so Sensex will increase. This is actually making a capitalist economy where money will concentrate in the hands of a few industrialists and at the macro-level poverty will increase.
If the same capitalist mindset continues for more time Government and Industrialist both will be at a losing end. Due to the closure of SMEs, unemployment will increase, poverty will increase in the long term purchasing power will reduce drastically and deep recession will take place slowly, these industrialists will face heat and struggle to survive during that recession.
For the government due to unemployment and poverty, people will start to react in the long term, the government will also start losing confidence among people. Government and industrialists both need to understand the business ecosystem and cycle of MACRO economics.
Now the problem is who will make understand TO GOVERNMENT that making business life easy for these small units will create jobs and increase demand and that will be a real increase in GDP. Actually in the name of ease of doing business compliance adherence and GST has paved the way for Ease of dying business.
The psychology of money and power always make people feel that they are most intelligent and visionary. They don’t listen to the experts of the subject and roam in their own fantasy world. This phycology has made many big leaders and businessmen bite the dust.
It’s a matter of country if obsession to bring the economy to mainstream is not controlled then damage to the 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 a capitalist mindset and democratic values.