Latest news with #Bhagat
Mint
02-06-2025
- Business
- Mint
Small businesses bleed cash as GST kicks in before payments
Every month, Deepali Bhagat is taxed on income that hasn't reached her. The founder of a small ed-tech firm in Bengaluru, Bhagat must pay goods and services tax (GST) on every invoice she raises—even when clients delay payments for months. The burden eats into her working capital, sometimes pushing her to borrow or dip into savings just to stay compliant. By year-end, nearly 3% of her revenue is lost to GST on unpaid dues. Bhagat's not alone. This is a growing pain point for countless small businesses across India. This cash flow crunch stems from how GST is structured—on an accrual basis. That means businesses must pay GST as soon as an invoice is raised, not when the money actually comes in. Under GST rules, businesses must pay tax on either the invoice date or the payment date, whichever comes first. But in practice, payments typically come 40 to 90 days after billing. For firms with limited expenses to offset For firms with limited expenses to offset input tax, this means paying GST out of pocket well before receiving actual payment, directly denting working capital. 'My payments are usually delayed by 60 days or more after raising an invoice. Since my major expenses are employee-related, I don't have much input GST to claim, so I end up paying GST well before I receive the actual payment," said Bhagat, founder of D-Bright Minds. This is hurting businesses in more than just affecting their cash flow management. Also read: Chartering the troubled waters of accommodation services under GST Pay now, get paid later Under the GST framework, businesses must pay tax on monthly sales within fixed deadlines, even if their clients haven't paid them yet. Take, for instance, a services firm, XYZ, that makes sales worth ₹5 lakh in May. It issues invoices totalling ₹5.9 lakh, including 18% GST ( ₹90,000). Step 1: By 11 June, XYZ must report its total sales (based on invoices issued) through GSTR-1. Step 2: By 20 June, it must pay ₹90,000 in GST—whether or not the money has been received—after adjusting for any input tax credit (ITC), i.e., the tax paid on its own purchases. It also needs to file GSTR-3B, a self-declared summary return, showing the GST due after deducting ITC. But here's the catch: XYZ's clients can take upto six months to pay. Meanwhile, XYZ has already paid GST on income that hasn't hit its bank account. If the buyer defaults altogether, XYZ is still liable for the GST already paid. Worse, there's no foolproof way to recover that tax from the government. 'The GST Act (CGST Act, SGST Act and IGST Act collectively referred to as GST Act) does not provide any mechanism for recovery of the dues by the seller," said Utkarsh Desai, a chartered accountant (CA). 'Once the tax invoice is issued, the supplier has to discharge the tax liability shown in the invoice, either by utilising input tax credit or making payment in cash, irrespective of whether he receives the payment from the customer or not." The credit note dilemma When clients don't pay, the only recourse available to sellers under GST is to issue a credit note for the unpaid amount. This allows them to reverse the GST paid on that portion of the invoice. 'The month in which the seller issues the credit note, he can reduce the GST applicable on that credit amount from his total GST liability of that month. This is how a credit note helps in reversing the GST to that extent," said CA Vijaykumar Puri, partner at VPRP & Co LLP. But using a credit note isn't as simple as it sounds. For starters, credit notes must include a valid reason for the reversal, and can only be used under certain conditions allowed by law. 'Credit notes can be issued in specific situations such as deficiency in quality, price charged is higher than the actual rate, quantity difference, etc," said Desai. So, it can only be issued under strict conditions outlined by the GST laws and the seller and the buyer can't use it as a workaround for non-payments. There's another complication: The buyer has to reverse the ITC they claimed on the unpaid invoice. 'In cases where a credit note reduces the taxable value or tax, and the buyer had earlier availed full ITC, he is required to reverse the proportionate ITC. So, the seller's GST liability decreases, but the buyer's ITC too gets reduced accordingly in that month," said Puri. The seller has to ensure whether the buyer has reversed the ITC or not. Earlier it was difficult for buyers to ascertain this, but with the recent launch of Invoice Management System (IMS), this challenge has been resolved. 'The buyer's ITC is automatically reduced in the auto-generated ITC statement (GSTR-2B) based on the GST amount mentioned in credit notes issued by the seller," said Ashish Karundia, founder, Ashish Karundia & Co. Chartered Accountants. "If the buyer believes that a credit note has been issued incorrectly, they have the option to reject it. If the buyer takes no action, the credit note is considered to be accepted by default. The seller can check whether the credit note has been accepted, rejected, or deemed accepted by the buyer through the IMS - Outward Supplies dashboard under the returns tab after logging into the GST portal," he added. Also read: Indian gig workers who offer mobility services deserve GST relief Third, issuing a credit note means the invoice is cancelled, so the seller loses the option to pursue recovery of bad debt legally. Desai said a credit note for bad debt is a double edged sword in that sense. 'Once the credit note is issued, it means that there is no supply to the extent of the credit note and hence the seller cannot even take legal action." Bhagat of D-Bright Minds said she has refrained from using the credit note route to recover GST on unpaid dues for this very reason. If a credit note is not issued and payment is not made within 180 days of invoice generation, the buyer has to mandatorily reverse ITC, under Rule 37 of CGST Rules. 'However, the seller doesn't get a GST refund on this written off debt. The government has essentially earned GST as well as reversed ITC on bad debt," said Puri. Limited solutions offer little relief To address delayed payments, small businesses can opt for an MSME Udyam certificate, which legally requires buyers to clear dues within 45 days. But in practice, this mandate often backfires. Large corporations tend to avoid working with MSME-registered vendors due to this strict timeline, said CA Vijaykumar Puri, partner at VPRP & Co LLP. 'There have also been cases where big companies take in writing from small businesses that the latter has delivered defective goods, so the former is not liable to pay within 45 days. Big corporations have found workarounds around Udyam certificates, so it has not been effective in facilitating faster payments for small businesses," he said. The government's other major step—the Quarterly Returns and Monthly Payment (QRMP) scheme introduced in 2021—also falls short for many. The scheme allows small businesses to file GST returns every quarter instead of every month, reducing compliance frequency in theory. 'While quarterly filing is technically allowed, most of my big clients follow monthly billing cycles, so we too have to file monthly returns," said Vishal Jasani, who runs an advertising business. 'The buyer gets to claim ITC quarterly if we file returns quarterly, so they insist on monthly filing. This increases both our compliance load and administrative costs." Businesses under QRMP can file Invoice Furnishing Facility (IFF) to report sales on a monthly basis. 'Under QRMP, the seller doesn't have to file GSTR-3B monthly, only quarterly. However, the seller is still required to deposit GST every month, as per prescribed computation mechanisms. Further, discrepancies between monthly IFF data and the quarterly GSTR-3B can trigger scrutiny. This often defeats the simplified compliance objective of the scheme," said Puri. Call for reform from small biz Most major economies, like the EU states, UK and the US allow small businesses cash based accounting, which means they are liable to pay tax only after payment is received. Experts say the Indian government should consider introducing this. 'We need to move away from low trust to a high trust system, especially for small businesses. Businesses upto a certain turnover, should be allowed to pay GST on cash basis," said Puri. Karundia agreed and said similar provisions existed under the service tax regime. 'The option to pay GST on a receipt basis could be considered for certain categories of taxpayers, such as those with a turnover of ₹50–75 lakhs in the previous financial year, similar to the service tax regime." Alternatively, lawmakers might consider allowing taxpayers to choose between the cash and accrual method of accounting, as permitted under income tax laws, he added. Jasani said in a competitive market, they can't revise client terms or billing structures without risking valuable relationships. 'As a result, we have to absorb these GST related inefficiencies ourselves." 'Aligning GST liability with actual payment receipt would significantly ease operational pressures and enable small businesses like ours to focus on growth rather than cash flow firefighting." Also read: Mint Quick Edit | India's GST peak is reassuring
Hindustan Times
28-05-2025
- Hindustan Times
Duped by travel agents, 3 Australia-bound Punjabi youngsters stuck in Iran
Duped by illegal travel agents, three Punjabi youngsters belonging to Hoshiarpur, Sangrur and Shaheed Bhagat Singh (SBS) Nagar, have been held captive in Iran allegedly by traffickers who are demanding hefty sums from their families for their release. In her complaint to the police, Bhagowal resident Gurdip Kaur said that Piplanwala-based agent brothers Dheeraj and Kamal Attwal lured her 23-year-old son, Amritpal Singh, with the promise of procuring a work permit visa to Australia and took ₹18 lakh in advance. On May 1, Amritpal and two other youngsters, Husanpreet Singh from Sangrur and Jaspal Singh from SBS Nagar, took the flight from Delhi international airport. Gurdip said that on May 2, her son called up to inform her that he had reached Iran from where he would be sent to Australia. 'An hour later, Amritpal called again and said that he and the other two youngsters had been held captive and the captors were demanding money saying they had not been paid by their agents,' Gurdip said. She said the accused made video calls from the phones of her son and the other two youngsters while mercilessly beating them. They want the three families to transfer ₹18 lakh each via money gram, she said. Gurdip said when her family approached the travel agents for help, they found they had fled their houses and their phones were switched off. On her complaint, a first information report (FIR) was registered at Model Town police station against the accused agents and one of their employees but so far no arrest has been made. Station house officer Gursahib Singh said that efforts were on to arrest the absconding agents.
Indian Express
16-05-2025
- Indian Express
Police officer among 4 booked for land scam in Pune
An offence has been registered against four persons including a police officer for an alleged land grabbing in Pune city, by making a fake landowner appear at the time of deed registration at a sub registrar office. The four accused persons include the fake landowner Aparna Patekar alias Aparna Yashpal Sharma, police officer Rajendra Landage, Shailesh Sadashiv Thombre and Anand Lalsaheb Bhagat. Police inspector Swati Khedkar lodged the first information report (FIR) in this case at the Chandan Nagar police station on Friday. As per the FIR, between the 2022 and May 2023, the accused persons allegedly conspired to grab around 10 acres land in Wagholi area in Pune. For this purpose, accused Aparna Patekar, allegedly appeared before a sub registrar office in Pune as Aparna Yashpal Sharma, who is the actual owner of the said land, for registration of sale deed. Police said fake Aadhaar cards, Pan cards in the name of Aparna Yashpal Sharma, were submitted at the sub registrar office to make Aparna Patel appear as the land owner. After the fraud came to light, cops booked Patekar along Thombre, Bhagat and Rajendra Landge, the then senior police inspector of Chandan Nagar police station, under sections 420, 467, 468, 471, 120 (b) of the Indian Penal Code. Police arrested the accused Bhagat (39), resident of Wadegaon in Haveli taluka of Pune district. Police produced Bhagat before a court in Pune on Friday. 'The court has remanded the arrested accused to police custody till May 20,' said assistant public prosecutor Yogesh Kadam. Police sought Bhagat's custody to probe the alleged criminal conspiracy, how the accused persons prepared forged identity documents in the name of land owner Aparna Sharma, who is based in Dubai. Police are probing whether the accused persons are involved in any other land-grabbing cases. Police are also investigating the possibility of a larger forgery and land scam racket in this case.
Time of India
12-05-2025
- Business
- Time of India
Textile sector faces challenges of rising defaults, fraud
Ahmedabad: The textile industry is facing significant challenges with rising defaults and incidents of fraud. The arbitration committee of the Maskati Kapad Market Mahajan reports that over the past six months, five trading firms, including one manufacturer, defaulted on payments totalling about Rs 60 crore. The association also handles 25-30 complaints monthly regarding fraudulent activities and Shah, chairman of the arbitration committee of the Maskati Kapad Market Mahajan, said, "This year, we saw an increase in cases of defaults. Around five traders started bankruptcy procedures. The default amount is around Rs 60 crore. As per our rules, we initiated the process to recover money for those traders whose payments are stuck with the bankrupt traders."He further explained that the rise in defaults could be attributed to traders diverting funds into alternative assets or failing to collect outstanding payments from other Bhagat, president of Maskati Mahajan, said, "Cases of cheating are steadily rising. Fraudsters gain trust by making timely payments for initial orders, but disappear after taking a larger stock on credit. In many cases, they travel to other cities to cheat traders there using the same modus operandi. The home department also formed a special investigation team (SIT) and registered a good number of complaints. Our arbitration panel is dealing with cases involving around 2,000 traders collectively cheated of more than Rs 300 crore. Around 700 traders and brokers have been accused of cheating."To prevent fraud, the Maskati Mahajan issued guidelines requiring traders to complete KYC for all buyers and conduct business exclusively with registered brokers. The organisation also prohibited fabric sales on credit to businesses operating for less than three years.
Mint
12-05-2025
- Business
- Mint
How to be a good mentor? Talk more
When Smita Bhagat at was looking for a job after completing her master's degree in marketing and finance from the University of Rajasthan in the 1990s, most still preferred to chase a career with government services. In fact, at the time she joined HDFC Bank in 1999, the private sector offered limited opportunities for women. 'Choosing to build my career in private sector banking was unconventional for a woman at that time. I still recall being the sole woman among a cohort of 10 trainees, an experience that was both daunting and defining at that point in time. For women, having the support of family, colleagues and mentors is indispensable while managing both career and personal responsibilities and I'm fortunate to have received it," says Mumbai-based Bhagat, Group Head-Retail Branch Banking, HDFC Bank. Over the last two decades, she has enjoyed different responsibilities at the bank. She considers the implementation of the JAM trinity—Jan Dhan accounts, Aadhaar identification and mobile connectivity—to be transformative developments for rural banking, where technology has significantly enhanced financial inclusion, especially for those in remote areas. Women too have leveraged digital banking to achieve greater financial independence over time. A lot has changed at HDFC Bank today. Women represent 26% of the workforce. Bhagat believes it is an evolving landscape where women are increasingly embracing leadership roles and navigating challenges with resilience. 'I believe effective leadership transcends gender. However, women often possess a heightened emotional quotient and strong multitasking abilities, which can be advantageous in leadership roles," she says. Also read: When serendipity helps build a strong career Bhagat talks to Lounge about mentorship and the advantage of effective time management. Who do you consider your mentor? My father was my earliest and most influential mentor, instilling in me the values of integrity and perseverance. I have also been privileged to work with several supportive supervisors who provided invaluable guidance during critical junctures of my career. One major insight you worked on with your mentor's guidance? I recall a senior colleague offering me advice shortly after I became a mother. She emphasised that balancing professional responsibilities and motherhood would be challenging, but I should not feel overwhelmed. I should continue to do what best I could do in both roles and feel good about it. Her advice to always prioritise my child's well-being without compromising my career resonated deeply, and has influenced my approach to leadership and mentorship. What does being a mentor mean to you? How do you mentor your colleagues at work? Mentorship entails empathetic listening and providing thoughtful guidance. I have observed that a significant number of professionals consider leaving their roles due to personal challenges faced at some point. By offering a non-judgmental space for them to express their concerns, I have been able to help them overcome that phase and continue being with the organisation. What's your morning schedule like? My mornings begin with a glass of water followed by exercise - either a walk or a gym session. Fitness is a non-negotiable part of my routine even during travel. Additionally, I make it a point to arrive in office at least 30 minutes early to ensure a structured and productive start to the day. What are some of the productivity principles you follow that have made your professional and personal life much easier? Effective time management and focus are fundamental to my approach. I maintain a disciplined schedule and ensure that my attention remains undivided during tasks. For me, work is not merely a responsibility but a source of fulfilment and stability. What's the one positive work routine you have developed during the pandemic? The pandemic led me to incorporate regular walking into my routine, a habit I have since retained. Walking has proven to be both therapeutic and effective for maintaining focus and well-being. Any book or podcast you would recommend about mentorship and growth? In my view, mentorship is best cultivated through personal experiences rather than only books or podcasts. I have gained invaluable lessons from my interactions with a diverse range of people, which has been more impactful for me. How do you unwind? Do you pursue any serious hobbies? Travel is a passion of mine—exploring India as well as learning more about the cities I visit overseas. I also have a keen interest in history, which I pursue through reading and visits to historical sites. Additionally, fitness remains a significant aspect of my routine, serving as a means of relaxation. Also read: What does your relationship with money say about you?
