Kanpur: The anger that was simmering among traders in Uttar Pradesh after the Yogi Adityanath government launched state-wide goods and services tax (GST) raids on 5 December, spilled onto the streets just a few days later.
Across Uttar Pradesh, 248 teams from the state GST department had conducted raids in 71 districts. These were carried out on the directions of UP Chief Minister Yogi Adityanath, who called for action against “GST theft” in the state.
The crackdown sparked massive protests by local and state-level market associations, who warned they would not tolerate either raids or surveys.
The raids on establishments allegedly evading the tax shines a spotlight on the messy implementation of GST, which continues to face resistance even five years after it was introduced.
Although there’s no official word yet, a news report put the amount of tax evaded at Rs 208 crore.
From Kanpur to Varanasi, small and medium traders downed shutters, staged protests and were seen arguing with officials while ripping papers, claiming they didn’t fall under the purview of the tax. Many traders claimed they were being targeted unfairly, but others admitted to ThePrint that they hadn’t registered under GST because it would gobble up a sizeable chunk of their profit.
Business came to a standstill with traders closing their shops either out of fear of harassment or to avoid paying a penalty for evading GST.
Traders claim that businesses with an annual turnover of up to Rs 40 lakh — which are exempted from paying GST — were also targeted.
“They came and inspected, did some documental work, and left. They said that they have orders from above. I don’t fall under the GST purview but still they inspected my shop,” says Mohammad Aqil, a kirana (grocery) store owner from Kanpur Dehat district’s Akbarpur area.
As similar raids were conducted on four other establishments in Akbarpur on 7 December, members of the local unit of UP Udyog Vyapar Mandal, or UP traders’ association, gathered around the shops and drove away the team of officials.
ThePrint reached the Uttar Pradesh Commercial Tax Commissioner Ministhy S. for a response, but she declined to comment.
However, Kamlesh Kumar, joint additional commissioner (GST), Kanpur Zone, who oversaw the raids, claimed the action was undertaken to check if the small traders did indeed have an annual turnover of under Rs 40 lakh.
Kumar was transferred to the Gorakhpur zone of the state GST department and joined his new position Thursday. Officials, however, said the transfer was a routine affair and that he had received his transfer orders even before the raids.
In the backdrop of fierce resistance, the government temporarily halted the raids Monday for 72 hours. Trade and market associations alleged “harassment of small and medium traders”.
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‘Raids based on inputs’
Careful to avoid any backlash in the face of municipal elections that are likely to be held early next year, the UP government is yet to resume the raids. However, an official confirmed to ThePrint that “action” would be initiated against tax evaders allegedly caught in the raids.
Fearful of further action, traders kept several markets in urban and rural Kanpur shut for a day Wednesday with even residents staying away from the otherwise bustling markets. Similar scenes played out across the state, including in Baghpat, Unnao, Varanasi, Gorakhpur, Budaun, Mahoba, Hardoi and Firozabad.
In Varanasi, traders protested on the premises of the sales tax office by lying on the ground as a metaphor for the death of their businesses on 12 December.
Meanwhile, grifters seized the opportunity to make a quick buck. In Siddharthnagar, a con man was arrested for allegedly extorting money from shopkeepers by pretending to be a GST official.
The State GST department has denied allegations of harassment. A senior official told ThePrint that they were targeting only those traders who were avoiding GST registration or tax payments.
The problem is widespread, with reports suggesting that the number of those indulging in trade without registration under GST may be as high as five lakh.
“Raids are based on a list prepared by the department. There are several types of inputs that we receive, including data analysis and complaints,” the official said.
“Tax evasion is a reality and it is a fact that several traders are avoiding GST registration or payments. Several traders are deliberately not taking registration and evading payments,” the official added.
‘Small traders unaware of the law’
Faced with allegations of tax evasion, small and medium traders in Kanpur are confused and agitated over the “manner” in which raids were conducted.
Business has been down since the pandemic began, said traders, and while big traders survive, the smaller ones have been struggling to improve sales.
Mohammad Kaleem, president of the udyog vyapar mandal of the hosiery market at Rajbi Road, told ThePrint that even small traders with an annual turnover of Rs 10-20 lakh saw raids even though “GST rules clearly state that traders who have an annual turnover of less than Rs 40 lakh don’t fall under the GST purview. We request Chief Minister Adityanath to give time to traders to help improve their trade and also stop officials from conducting raids in an unrestrained fashion.”
Mohammad Ikram, whose hosiery shop was among the establishments that faced raids, said: “They went back when they didn’t find anything. Shops got shut because most are small traders (who got scared)”.
But some believe there’s merit to the allegation that some traders have been evading GST registration and tax payments.
“Those traders who work on a small level, i.e, purchase and sell on an everyday basis, don’t register themselves under the GST. Most are unaware of the law and they think that they won’t be able to show bills, returns, etc,” wholesale cloth seller Mohammad Irfan told ThePrint, adding that before GST was introduced, there was no tax on unstitched cloth.
“Some discrepancies are likely among small traders. They want to evade penalties imposed for even small discrepancies,” he said. This problem, he said, was particularly widespread among small traders in the interiors of the Kanpur district.
“There are some faults at our own end too,” Irfan said. “Even if the big traders are targeted, fear has passed on to the small traders who fear action,” he added.
Some claim traders face heavy penalties for “discrepancy of even one rupee”.
“One of our customers from Prayagraj purchased material for Rs 30,000. However, when the GST officials checked the exact number of pieces, they found six more pieces (of cloth). He had to pay a heavy penalty,” Umer Beg, a wholesaler in the hosiery market, told ThePrint.
Another wholesale seller in the same market, who wished to not be named, said that many small traders avoid GST to ensure that they don’t come under the government’s radar.
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Why traders avoid GST registration
Computerised billing, dependence on lawyers or chartered accountants, and paperwork are a deterrent as well.
Naresh Dayal, a member of the Rajbi Road Vyapar Mandal, told ThePrint that documentation has increased multifold since GST was implemented.
“Earlier we were only limited to hand billing (system), but now, all billing is computerised. (This increases) our costs because we have to employ a person for maintaining computerised records. GST itself is not bad but it needs to be simplified,” he said, adding that they have to depend on lawyers or chartered accountants for maintaining bills and filing returns.
Rashid, another wholesaler from Pech Bagh, said that small-scale buyers don’t want to accept GST bills.
“We usually get customers who sell on footpaths and in villages, etc. and they don’t want to take bills. (The) market is down, and we hardly have four to six customers in a day. Most of them don’t want bills. Even if we sell at a cheaper rate, we have to bear the losses because we end up cutting GST bills at the end of the day,” he said.
Traders also cite low profits to avoid GST registration.
Hosiery manufacturer Mohammad Ishtiaq said traders had to pay GST regardless of the sales they make. “When we sell an item, the GST rate applicable is five per cent only. We are hardly making any profits but the share of GST has to be paid irrespective of our sales. Our profits are only about 2 per cent at the end of the day,” Ishtiaq said.
GST official Kamlesh Kumar quoted above denied that heavy penalties were imposed.
“The penalty imposed is usually very small and there is no harassment of any trader. If traders are registered, they don’t need to be scared,” he said.
(Edited by Uttara Ramaswamy)
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