Are Big Corporates & Government Policies Dampening Entrepreneurial Spirit

According to a PIB press release dated 9th August 2021, “As per the information received from Central Statistics Office, Ministry of Statistics & PI, Share of MSME Gross Value Added (GVA) in All India Gross Domestic Product at current prices (2011-12) for the year 2018-19 and 2019-20 were 30.5% and 30.0% respectively.”

India’s growing group of ‘population of working age’ has been creating tremendous amount of pressure on the government of the day for employment. In the era of ‘lesser jobs available’, India & Indians have embarked upon the journey of Entrepreneurship. However, the path isn’t easy at all. Government has rolled out several schemes for Entrepreneurs and has even carved out a ministry (and rightfully so) for MSMEs. Even the honourable Prime Minister’s clarion call for ATMA NIRBHAR BHARAT also tends to encourage spirit of entrepreneurship. However, one of the major impediments for these ambitious (many are amazingly capable as well) set of risk takers is working capital and “One Kind Fits All” syndrome. Behind one success story of a Bootstrap to Unicorn, there are thousands (if not millions) of painstaking yet less-successful ones.

Most of these Entrepreneurs invest their LIVES in creating these organizations and yet when they start working with the larger organizations (Entrepreneurs in B2B Space), working capital cycle becomes the biggest impediment in their journey. Above all these Tough GST Rules and Tax Refund mechanisms become double whammy for these entrepreneurial organizations. Let me explain this taking an example:

When a comparatively small organization raises an invoice on a large organization, the large one takes it’s own time to process and make the payment (Normally it’s a cycle of 60-90 days), the smaller organization is burdened to arrange for the working capital for the period for which the work has been invoiced for and an additional time before the invoice is paid for.

But, hey hold on… that’s not all. Here comes the double whammy. The GST rule says for all invoices raised for the previous month have to be declared by 10th of Next Month through GSTR-1 (to ensure paying organizations get their due input credit for the taxes SUPPOSEDLY paid during the previous month) and the same stipulated GST has to be paid off though GSTR 3B on or before 20th of the month.

So now the small organization has to arrange for the cashflow that not only includes the period for which invoices are raised and not paid for, but for the Government Tax liabilities as well. Imagine the cost of capital vis-à-vis the stipulated profit that a small organization can earn in an overtly price-sensitive market such as India.

These practices and rules are proving to be biggest dampeners for entrepreneurial ecosystem in our country. Question is “Will the Government and Large Organizations Act on this?”

Mind You, without a thriving entrepreneurial ecosystem talks of inclusive economic growth, 5 trillion economy and above all a TRUE ATMA NIRBHAR BHARAT would just be another pipe-dream.

Note: Would soon publish few more articles around how long-delayed payments/non-payments are killing small businesses and spirit of entrepreneurship. ????

#Entrepreneurship #Business #ResponsibleBusiness #CashFlow #GST #Government #Corporates