GST Makes Companies Reveal Actual Number of Employees

As per the figures of Employees’ Provident Fund Organisation (EPFO), it came out that 4.1 million job applications were generated between September 2017 to April 2018. It seems that there is nothing interesting regarding the job creation which keeps varying with the increase in job deficiency, according to the aggregate surveys of employment conducted by the National Sample Survey Organisation. It is assumed that the Goods and Service Tax (GST) is convincing employers to dedicate their previous informal workers as formal employees, thus giving an impression of the increase in employment.

Firms that purchase an enterprise output, as well as firms that render its inputs, have to make audit trails under GST. Goods and Services Tax (GST) has created pressure on the company to clearly define the number of employees, workers and their salaries and wages respectively.

Let’s understand with an example, assume one of the company is paying Rs 1.2 crore GST per year after availing input tax credit paid by them at the rate of 5%. Obviously, that means the value of the company has been enhanced by Rs 10 crore and this figure is total of the company profits and expenditure incurred on wages and salaries. Indian business firms had the scope of manipulating their accounts before the implementation of GST.

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GST now restricted their freedom on maintaining account books, if in case the firms present the less expenditure on wages and salaries, gross profit would enhance. There are ways through which the firms can show lesser taxable profits in their accounting books: Either you have to pay higher income tax as well as dividends or you should stop demonstrating a higher number of workers/ employees are working in your company. This might be one of the reasons why EPFO figures have been continuously increasing.

Goods and Services Tax (GST) is a blessing for Non-Govt Organizations (NGOs) as well as for trade unions as it keeps track on Indian exporters and thus helps consumer groups in the countries importing the products by ensuring brands and suppliers abide by fair labour practices.

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The financial reporting system of companies registered under the GST Regime will make provision for them to obtain the sufficient number of workers as per the norms. The strict action could be taken against those companies which do not abide by the rules of minimum wages. GST also enables a sigh of relief for those who want the implementation of minimum wages act in its true sense.