Tamil Nadu: traders in Erode and Madurai, two major commercial hubs in Tamil Nadu, participated in a bandh to protest against the imposition of a Goods and Services Tax (GST) of 18% on commercial property rent. The decision to shut down shops and businesses was taken by various trade associations in response to the central government’s move, which they argue will significantly impact small and medium enterprises (SMEs).
The GST on rent, which came into effect on November 1, 2024, has drawn widespread criticism from the business community. Traders claim that this additional tax burden will further erode their already thin profit margins and make it difficult to sustain their businesses. They also point out that the government’s decision not to allow businesses with an annual turnover of less than Rs 1.5 crore to claim Input Tax Credit (ITC) for the GST on rent exacerbates the problem.
The bandh in Erode and Madurai saw widespread participation from various sectors, including textiles, hardware, electronics, and food. Markets and shops remained closed throughout the day, impacting both businesses and consumers. The Federation of All Trade and Industry Associations (FATIA) in Erode estimates that the bandh resulted in a loss of business worth Rs 100 crore.
Impact on Small Businesses
The GST on rent is particularly detrimental to small businesses, many of which operate on tight budgets. The additional tax burden will force them to either pass on the cost to consumers or absorb it, further squeezing their profit margins. This could lead to job losses and business closures, particularly in the MSME sector, which is already struggling with various economic challenges.
Government’s Stance
The central government has defended the decision to impose GST on rent, arguing that it will bring transparency and accountability to the real estate sector. However, critics contend that the tax is poorly designed and will have a negative impact on the economy. They argue that the government should reconsider the decision and exempt small businesses from the GST on rent.
Future Outlook
The future of the GST on rent remains uncertain. While the government has not indicated any immediate plans to change the policy, the widespread protests and negative feedback from the business community may force them to reconsider. It is possible that the government may introduce exemptions or reduce the GST rate for small businesses to alleviate the burden.
Final Thought
The GST on rent is a significant issue that has impacted the business community in Tamil Nadu. The bandh in Erode and Madurai highlights the widespread discontent among traders and underscores the need for a re-evaluation of the policy. The government should take into account the concerns of small businesses and introduce measures to mitigate the negative impact of the GST on rent
