How much did the GST affect an unorganized sector? It's hard to say

The goods and services tax (GST), which lasted one year, was supposed to hit the unorganized sector. However, even after a year of implementing the GST, there is no research or study on the impact of the new tax on the unorganized sector. Most reports on the distress of the unorganized sector were based on anecdotes rather than data.

Asked about the distress reported in the unorganized sector because of the GST, Treasury Secretary Hasmukh Adhia told Business Today: "There are anecdotal stories we hear, but they do not come from data from research. "

Pronab Sen, former Chief Indian Statistician and Economist, explains why it is difficult to measure the impact of the GST on the unorganized sector.

"I do not think it's easy to understand that the damage to the We do not really measure the extent to which the informal sector sells to the organized sector, and how much This sector can be replaced by the organized sector, which in my opinion is virtually impossible to determine.

He says however that there will certainly be a real effect (from the GST on the unorganized sector). "I do not think the government can really get rid of it, but the real question is how bad it is and if the unorganized sector would be able to adapt to it."

To deal with the impact of the GST In his opinion, the unorganized sector should be able to provide goods or services at a price lower than the deductible price paid by the organized sector.

"Today, for example, the organized sector pays 15% tax while the unorganized sector that does not pay tax automatically gets a 15 percent advantage over the price, now if he goes to the GST, this benefit disappears and even if he gets an input tax credit, says:

Anil Bharadwaj, Secretary General of the Federation of Micro and Small and medium-sized Indian companies (FISME), gives more details on this subject. He says that 10 to 15 percent of MSMEs that were part of the VAT regime, the transition was not painful. However, it is the smaller companies, the microenterprises that were not part of the formal sector, that are the hardest hit.

"In the pre-GST era, up to a turnover of Rs. But for this reason, all the taxes you paid on inputs become part of your costs The government gave this option keeping in mind that even if they earn 3-4 percent of value added or even 10 per cent of value-added, the company only retained the tax on that part of the value added because it had already paid taxes on raw material purchases, which changed in the post-GST regime and it became a problem. Bharadwaj.

Meanwhile, revenue secretary Adhia says the government thinks the GST has led to some formalization of the MSME sector and that it has helped them. "Now, they're in the net of the GST, they can prove that they have a basic minimum income, which has improved their chances of obtaining credit from banks. "The credit levy of MSMEs has increased," he says

. the government, the number of registered taxpayers jumped from 64 lakh under the previous tax system to more than 1.12 crore, an increase of 40 percent. This means that up to 48.40 lakh new dealers have entered the new tax system indicating the formalization of the economy.