Gujarat Sees Shutdown of 4.05 Lakh Businesses Following GST Implementation

By: Admin
June 29, 2024
Categories: GST Recent News
4 Min Read

The Goods and Services Tax (GST) system, intended to streamline taxes and enhance business efficiency, has seen a significant impact in Gujarat, with approximately 4.05 lakh businesses ceasing operations following its implementation. Data from the state’s commercial tax department indicates that an equivalent number of GST Identification Numbers (GSTINs) have been revoked, suggesting that these businesses either closed or were amalgamated.

In the preceding two years, the number of closures accounted for 47% of the total closures in the initial five years of the GST regime. By the fiscal year 2022, around 2.75 lakh taxpayers had their GSTINs revoked. The current figure of 4.05 lakh cancelled GSTINs represents 30% of the existing 11.95 lakh taxpayers in Gujarat.

State GST officials and industry experts attribute this trend to business closures, consolidations, mergers, and acquisitions. A source from the State GST department explained that businesses often register for GST in anticipation of expansion. However, when plans do not materialize, these entities face penalties for not filing returns, leading many to surrender their GSTINs.

The source also highlighted that the past couple of years have seen numerous mergers, acquisitions, and other forms of consolidation, resulting in the surrender of GSTINs. Conversely, businesses struggling in certain sectors have also chosen to shut down. Recent geopolitical events have further adversely affected businesses, forcing many to close, particularly in sectors such as engineering, plastics, and retail.

A former president of the Gujarat Chamber of Commerce and Industry (GCCI) added that stringent actions by the state goods and services tax department against entities involved in fraudulent billing have also led to the closure of many shadow companies. Data from the Union MSME ministry reveals that between July 1, 2020, and December 2023, 32,298 micro, small, and medium enterprises (MSMEs) cancelled their Udyam registrations, including 2,818 such units in Gujarat, the third-highest number among Indian states.

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