Indore, the business hub of Madhya Pradesh, is well
known for its local food brands. Walk into any roadside
shop to buy a packet of 'namkeen', there would be the
regular Lays and Bingo on the shop shelves, but in
addition to that there will be a plethora of local
namkeen brands such as Motu Patlu, Pet Pooja and All Is
Well sharing shelf space. In most cases these local
brands have more takers as they offer competitive
pricing, more grammage of the product and also keep the
retailer happier by offering higher margins. But none of
these brands, says a local wholesaler, pay taxes. They
don't even do proper billing to avoid paying taxes.
When GST was first announced in July last year, many
local brands panicked and went out of market for over a
month, says a local retailer at Indore. But most of
these brands are back now after finding loopholes in the
system which they can capitalise upon.
Most of these brands have now started generating bills
for 10-15 per cent of their products, but continue to
sell majority in the unorganised way. "I don't know for
how long they will be able to do business this way, but
none of the local brands are doing business in the
organised way," says a distributor of an established
food brand, based in Indore.
While the e-way bill was still getting tested, most
local brands were already trying ways to avoid getting
registered on the portal. A reasonably well-known 'namkeen'
brand, says this distributor, has started transporting
its products on Volvo buses just to avoid paying taxes,
while some are using milk men to distribute their
products.
Similarly, a detergent maker in the town of Rau, in the
outskirts of Indore, cribs that despite having a GST
number, he isn't able to do business the proper way as
his raw material suppliers refuse to give him a bill.
"Even the wholesalers refuse to buy my products if I
insist on billing, since I am an extremely small
manufacturer."
So, does evading taxes or not doing business in the
proper way actually give them higher profits. "Not
really. There is hardly any difference, but people are
just not used to paying taxes," says this detergent
manufacturer.
This practise of not doing bill-based transactions is
rampant in larger cities too. Walk into Crawford Market,
the wholesale market of Mumbai, traders are more than
happy to do cash transactions without generating a bill.
They insist on transacting without a bill and lure the
consumer with the carrot that he/she won't be charged
GST if they don't insist on a bill.
Will GST and the e-way bill succeed in getting these
well entrenched local brands to come within the tax
bracket? One has to wait and watch. As of now most local
businesses are trying to find a way out.
Source::: Business
Today, dated 03/04/2018.