For the morons who think reducing the GST on eateries to 5% is a good idea, expect to see some of your favorite eateries closing down because they continue to pay high GST on their rent, equipment, furniture, services availed and raw materials etc., while receiving no input credit from the #GABBARment.
It takes a moron to celebrate a move like this one.
I voted for Modi, but his policies have been a complete departure from his campaign promises (of pro-entrepreneurship governance) and consequently a disaster. I hate to admit it, but India would be in a better position had Rahul Gandhi ascended to power instead of Modi.
Now, here’s a for instance for you…
We were planning to invest some serious dough in opening a cafe chain in India, starting in Delhi, and the deal was about to be finalized tomorrow. Luckily for us, this aberration become public just in time, and we were saved. I just had a call with the entrepreneur we were backing, and he himself told me how it would be a real bad idea to continue.
First, there’s the political instability. India’s just too unstable right now to invest in. I can incorporate anywhere in the world and run a business. I don’t need to run a business in India just because I was born here. And as my clients have repeatedly told me, political stability is the key to business success and prosperity. Nobody likes undue risk, and when the people in charge of running a country are hell-bent on destroying the very notion of political or economic stability for one reason or another, an investor like me happily takes his money elsewhere.
Here’s some math for you…
We’d have spent roughly 50 Lacs on capital acquisition, rentals, equipment, furniture, electronics, lighting, interiors and so on. We’d have paid somewhere around 12 Lacs in GST on that.
Then on a monthly basis, we expected to spend at least 10 Lacs on GST-worthy items like rent, bills, upgrades, marketing, raw materials and so on. So on a monthly basis we’d be paying 2-3 Lacs in GST.
Up until today, the initial 12 Lacs paid out in GST, and the additional (approx) 33 Lacs in GST we’d pay to run our business would be available as an input credit for the business.
We figured with annual sales of roughly 250 Lacs, we’d be collecting roughly 50 Lacs in GST, so we’d mostly be covered, if not entirely.
But now even if we could get input credit for GST paid, we’d still only be collecting a measly 12.5 Lacs in GST annually from our customers. Less than quarter of what we would have shelved out in GST. But we don’t get the input credit at all.
So here’s our *optimistic scenario* math now, should we go ahead to open this chain…
Initial expenditure of 50 Lacs requires us to pay 12 Lacs GST.
Annual expenses of 1.2 Crores require us to pay 30 Lacs in GST.
Total revenue of 2.5 Crores is collected. We collect 12.5 Lacs GST from customers, but we get no benefit, we simply pay it to the #GABBARment.
Now, we created a surplus of roughly 1.3 Crores (2.5 revenue MINUS 1.2 GSTaxable-EXPENSES), but we are left with only half of that, because the other half is paid out as GST.
And we haven’t even begin talking about the non GSTaxable expenses like salaries yet.
All in all, even with optimistic revenue projections, we’ll barely manage to break even.
Does this #GABBARment sound pro-entrepreneur to you?