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4.05 lakh businesses based in State closed since GST rollout

July 2, 2024
Economy
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Ahmedabad: While the goods and services tax regime aimed at improving business ease and simplifying taxes, some 4.05 lakh businesses closed after the new regime was rolled out. According to data from the State Commercial Tax Department, 4.05 lakh GST identification numbers (GSTINs) have been cancelled so far, implying that these many businesses either shut down or were consolidated. The number of closures in the past two years are equivalent to 47% of the number of closures in the first five years of the GST regime. Till FY 2022, some 2.75 lakh taxpayers got their GSTINs cancelled. The number of cancelled GSTINs — 4.05 lakh — equals 30% of the current number of 11.95 lakh taxpayers in Gujarat. SGST officials and industry players attribute this to business closures or consolidation, mergers and acquisitions.

People often register for GST in anticipation of business expansion. In some cases, things do not work out and such entities face penalties for not filing returns. Many then surrender their GSTINs, a source in the SGST Department said. There were many mergers, acquisitions and other types of consolidation in the past couple of years, which also led to GSTINs being surrendered. On the other hand, those not doing well in certain sectors also shut down. Recent geopolitical events have also had an adverse impact on businesses, forcing many to close down. This is particularly true for sectors such as engineering, plastics and retail, where many businesses faced tough times and were forced to shut down. Strict action by the state goods and services tax department on entities involved in bogus billing also compelled many shadow companies to shut down. Data from the Union MSME ministry shows that 32,298 micro, small and medium enterprises (MSMEs) cancelled their Udyam registrations between July 1, 2020 and December 2023. These included 2,818 such units in Gujarat, the third highest number among Indian States.

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