In the bustling economic hub of Ahmedabad, the implementation of the Goods and Services Tax (GST) promised a simplified taxation system, designed to enhance business operations. However, data from the state commercial tax department reveals a staggering reality: approximately 405,000 businesses in Gujarat have shuttered since the GST rollout, highlighting significant challenges in the new tax regime.
This wave of closures, represented by the cancellation of GST Identification Numbers (GSTINs), reflects both the consolidation of businesses and outright shutdowns. Alarmingly, these closures in the past two years alone account for nearly 47% of all cancellations since the GST was introduced, marking a significant trend in Gujarat’s economic landscape. To put it into perspective, the cancelled GSTINs comprise 30% of the current 1.195 million taxpayers in the state.
Industry experts and officials from the State Goods and Services Tax (SGST) department attribute this upheaval to various factors, including strategic mergers, acquisitions, and unfortunate closures. Many entrepreneurs registered for GST with expansion ambitions; however, unanticipated challenges often resulted in penalties for non-compliance, prompting them to surrender their registrations. The past years have also seen a surge in business consolidations, particularly in sectors like engineering, plastics, and retail, where geopolitical tensions further strained operations.
Pathik Patwari, former president of the Gujarat Chamber of Commerce and Industry (GCCI), underscores the impact of rigorous enforcement against fraudulent billing practices, which forced many non-compliant entities to shut down. This, coupled with adverse economic conditions, has led to the closure of numerous enterprises across the state.
Moreover, data from the Union MSME ministry reveals that from July 2020 to December 2023, about 32,298 micro, small, and medium enterprises (MSMEs) nationwide relinquished their Udyam registrations, with Gujarat accounting for a notable share. This exodus signifies deeper structural challenges that need to be addressed to revitalize the state’s entrepreneurial spirit.
In essence, while the GST regime aimed to streamline taxation and foster business growth, its implementation has unveiled significant hurdles that have reshaped Gujarat’s commercial terrain. The state now stands at a crossroads, navigating the delicate balance between regulatory compliance and fostering a conducive environment for business resilience and growth.