Reverse charge under GST puts strain on unorganised sector

Large companies ask smaller firms to register soon

by Janhavi Behere

The reverse charge mechanism (RCM) under the GST has resulted in higher compliance cost and a larger working capital requirement resulting in small-businesses in the unorganised sector getting affected. Under this RCM, the liability to pay the tax falls on the recipient rather than the supplier. In case a large company outsources job work activities to unorganised units, the big company being the recipient is expected to pay 18 per cent tax on the job work under RCM. As per a Business Standard report, textile, leather making units, FMGCs have sent a notice to their vendors and suppliers to register on the GSTN or their orders might be revoked.

References
1. https://www.pressreader.com/india/business-standard/20170717/281500751300059
CMIE STATISTICS
Unemployment Rate
Per cent
5.0 -0.1
Consumer Sentiments Index
Base September-December 2015
96.0 0.0
Consumer Expectations Index
Base September-December 2015
94.5 0.0
Current Economic Conditions Index
Base September-December 2015
98.2 0.0
Quarterly CapeEx Aggregates
(Rs.trillion) Dec 16 Mar 17 Jun 17 Sep 17
New projects 2.33 3.81 2.07 1.02
Completed projects 1.01 1.94 1.14 0.99
Stalled projects 1.13 0.70 2.66 0.64
Revived projects 0.18 0.67 0.30 0.23
Implementation stalled projects 0.82 0.33 0.68 0.61
Updated on: 24 Nov 2017 8:20PM
Quarterly Financials of Listed Companies
(% change) Dec 16 Mar 17 Jun 17 Sep 17
All listed Companies
 Income 6.2 10.2 9.8 8.6
 Expenses 6.3 11.9 10.0 9.8
 Net profit 40.3 15.8 -19.7 -17.5
 PAT margin (%) 6.1 6.0 5.3 5.9
 Count of Cos. 4,507 4,438 4,292 2,833
Non-financial Companies
 Income 5.9 11.8 10.4 8.6
 Expenses 7.2 15.6 10.7 8.5
 Net profit 24.5 -2.5 -25.1 -4.6
 PAT margin (%) 6.2 6.2 5.2 6.8
 Net fixed assets 6.9 10.1
 Current assets 2.6 2.3
 Current liabilities 8.8 10.0
 Borrowings 4.8 4.0
 Reserves & surplus 6.3 8.2
 Count of Cos. 3,488 3,439 3,343 2,079
Numbers are net of P&E
Updated on: 24 Nov 2017 8:30PM
Annual Financials of All Companies
(% change) FY14 FY15 FY16 FY17
All Companies
 Income 10.0 5.2 1.1 6.6
 Expenses 9.9 5.2 1.2 6.8
 Net profit -2.2 1.6 -12.9 20.2
 PAT margin (%) 3.2 3.2 2.9 6.5
 Assets 12.3 9.4 9.6 8.8
 Net worth 9.6 8.7 10.3 8.5
 RONW (%) 6.2 6.1 5.1 9.6
 Count of Cos. 23,895 23,579 20,184 3,629
Non-financial Companies
 Income 9.7 4.3 0.1 6.5
 Expenses 9.3 4.5 -0.6 7.4
 Net profit -2.7 -5.5 11.5 14.3
 PAT margin (%) 2.2 2.1 2.6 6.5
 Net fixed assets 11.6 13.4 15.1 7.3
 Net worth 8.2 7.1 10.6 7.2
 RONW (%) 5.1 4.9 5.4 11.0
 Debt / Equity (times) 1.1 1.1 1.1 0.6
 Interest cover (times) 2.0 1.9 2.0 3.7
 Net working capital cycle (days) 69 67 66 50
 Count of Cos. 19,154 19,053 16,707 2,782
Numbers are net of P&E
Updated on: 15 Nov 2017 2:29PM

Data added for HPI at Assessment prices and HPI at Market prices