How SoMoKe's coming GST may reduce income of small businesses, feb-27-2015 No.4

February 27, 2015

https://www.facebook.com/mehtarahulc/posts/10152622959651922

How SoMoKe's coming GST may reduce income of small businesses
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The GST will be 25% (*) . And there will be two types of businesses --- one which will pay 2% on lumpsum revenue . The revenue must be below Rs 50 lakhs or some such limit.
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The small trader doesnt get GST he paid as credit. And the GST of 2% he charged cannot be taken as input credit. .
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So business of small traders will decrease. Let me explain how.
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Say manufacturer M is selling air conditioner at Rs 20000 . His bill will be
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Price = Rs 20000
GST = Rs 5000 (25%)
Total = Rs 25000
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Say a large retailer LR sells same ac as
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Price = Rs 21000
GST = Rs 5250
Total = Rs 26250
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Now consider a small retailer SR.. Say he decides to sell ac at zero profit (I want to show that even at zero profit, he will lose customers to big retailer)
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Price he paid = Rs 25000 (because he cant deduct GST of Rs 5000)
GST = 2% = Rs 500
Total = Rs 25500
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So his price is lesser than LR = Large retailer.
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But a large business LB will buy from LR and NOT SR. Why?
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WHY ???
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No psychological reason,. But real material reason