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Ease of business under the Modi Government

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monishs
monishs
Monish Shete is the CEO of Elscint Automation, a leading manufacturer of vibratory bowl feeders, part feeders and small part handling products in India. He has almost 3 decades of experience, with the last 20 years being with Elscint. Since joining Elscint, he has consciously shifted the focus of Elscint towards exports and now more than 50% of Elscint's revenues.

Lately, especially with elections round the corner, there has been a lot of talk by various opposition parties about how small businessmen are suffering, especially due to the after effects of demonetization and GST. Further, even eminent economists are saying that there is jobless growth in India. Further, all the analysts mention about how industry itself is suffering. I am a small businessman having a manufacturing unit with 35 people working under me. I sell my goods all over India as well as export too. I would like to mention my experiences about these various points –

  1. DEMONITISATION: 100% of the business transactions we make are accounted even though we deal with small companies as well as big corporates. The reason being that everyone requires tax set-off, even in the earlier excise and vat regime. Hence, all dealings are by cheque / bank transfers. Even all vendors and employees are paid by cheque / bank transfers. Cash is required only for minor day to day petty cash purchases. Earlier the major cash expenses were octroi charges paid to various courier boys, who used to get the material by paying octroi. With octroi being abolished, this component of cash expense has been eliminated. With regard to minor day to day expenses for items bought from nearby shops, after demonetization, we set a practice of weekly cheque payments with these shops, reducing the cash outflow. Further, as I did not have any excess cash lying with me, the problem of depositing the same did not arise!

Another advantage was- after demonetization, everybody started accepting cheques and credit cards, to the extent that even the local grocery shop and vegetable vendor, further reducing daily cash expenses.

Who has suffered are the businessmen who dealt mainly in cash. But then Demonetization put them on the the track.

  1. GST – The advantages are GST are numerous.
    1. First and foremost, as complete credit can be availed, there is an incentive for all businesses to purchase with bill, reducing the cash component.
    2. Earlier, for out of state purchases, one had to get C Form from the buyer. This was a huge problem for companies like mine who deal in capital goods and have one time transactions with a lot of customers. Every year, the C Form not received liability came in lakhs of rupees to be paid to the sales tax department. With GST, the whole requirement of getting C Forms is gone, resulting in a lot of savings in time and money. Nobody is highlighting this advantage!
    3. Return filing is now smooth and can be done by any lay person. Earlier, there were Excise returns, VAT returns (in fact, one for CST and one for VAT) – monthly/quarterly as well as annually, LBT Tax etc. Further, along with the returns, there were the mandatory audits and scrutinies, which resulted in corruption and huge wastage of time. Plus consultants had to be paid for the returns as well as audits.

With GST, all this is gone and the return filing, though 2 returns a month, is quite smooth. A lot of service providers too have cropped up with very reasonable fees. Average fee per return is just Rs. 300 to 600 per month. This is very reasonable and affordable even for small businessmen.

Hence, the contention that small businessmen are suffering due to GST and filing of returns is a head ache is totally wrong and agenda driven.

Opposition leaders are saying that traders are under distress due to GST implementation. I meet a lot of businessmen and traders on a day to day basis. However, none has ever complained about GST. Problems of small traders due to GST are figment of the imagination of journalists, economists and opposition leaders.

Further, there are lot of compliances for most factory owners. The first and foremost being getting pollution control certification. Earlier, one had to go to the relevant office, get the forms, fill them and submit them with a demand draft. Then they would visit for inspection, expect something in return when the certificate was ready! Now, this time, I had to fill the form on their website, pay the fees by credit card / bank transfer and the certificate came by e-mail and that too for 5 years! If this is not ease of business, what is!

Every business has to pay various things like ESI, PF etc. Now this too is online along with the returns.

Forming a company results in you automatically getting PAN, TAN etc. within 2 days. Hasn’t this made life easy for businessmen?

In case of exports, earlier proof of exports had to be submitted to the excise dept who would disallow the same in case of late submission. Now, one just has to mention the shipping bill no. in the GST return, eliminating the need for providing hard copies to the excise dept.

As against the hullabaloo of jobless growth, on the contrary it is the reverse, there is a paucity of good people. It is next to impossible to get good quality skilled workers. As against this, the number of fresh Engineers inquiring for jobs is huge. Hence, the problem right now is that people are overqualified. 20 years back, there were ITIs looking for jobs, then there were diplomas who were asking for jobs and now its qualified Engineers who are looking for jobs. Most engineers are not ready to work with their hands and want jobs which involve checking and working on the computer. Now the problem is that there are jobs but not the right candidates.

Does this mean, everything is hunky dory and there are no problems? Of course, businessmen suffer a lot but there life has certainly improved due to the various initiatives of the Modi government. Below is a wish list on behalf of small businessmen –

  1. In case customers don’t pay, it’s a huge loss for the business who has spent time, money and taxes on manufacturing. Making it compulsory for customers to pay and penalizing willful defaulters should be the next step of reforms for the 2nd term of Modi Government.
  2. The number of returns, other than GST i.e. ESI / PF / Factory Act etc. is huge. Can’t these be eliminated in some way and making self-declaration mandatory, especially for smaller businessmen having turnovers upto say 25 crores.
  3. As mentioned above, getting good employees is a problem and Modi government’s Skill India initiative is the most appropriate but needs to be made more popular.
  4. Number of audits and scrutinies should be reduced and preferably eliminated at least for small businesses who do not have the infrastructure and people to complete all such things.
  5. Payment of toll is a pain, not for the expense but for the time which goes in the line. Can’t there be a single toll for a complete stretch. In China, one gets on the expressway and there are no obstructions and toll is applicable when one exits the expressway. Depending upon where one gets out, toll is applicable. Not a difficult system to implement!
  6. Inflation is a huge problem as customers do not increase prices and costs keep on rising. Reducing subsidies and further reducing the fiscal deficit would go a long way in helping out businesses.
  7. The government should not get into providing minimum income guarantee as it will eliminate the urge to work, resulting in increase in wages and Indian products being uncompetitive.
  8. The government should also work towards increasing the strength of the Rupee. Economists as well as IMF talks about depreciating the currency to increase export competitiveness but it is not so. Most input materials are related to global rates and any depreciation in the currency results in increase in input costs. Even being a net exporter, I am for Rupee appreciation. An appreciating currency will result in reduction in costs and prices.

With this, I appeal to all to vote for the Modi government.

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monishs
monishs
Monish Shete is the CEO of Elscint Automation, a leading manufacturer of vibratory bowl feeders, part feeders and small part handling products in India. He has almost 3 decades of experience, with the last 20 years being with Elscint. Since joining Elscint, he has consciously shifted the focus of Elscint towards exports and now more than 50% of Elscint's revenues.
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