Recently I had a client who, for some reason, had trust issues with all their vendors.

I raised an invoice of (let’s say) 10L + 18% GST = 11.8L.

Now, in India, for our services (web and mobile app development), the client is supposed to cut 10% TDS (on the base price).

So they had to pay us 9L +1.18L, and give 1L to the govt.

They told me that they’ve made the payment, I went and checked in my bank account, and was surprised to see a payment of only 9L instead of 10.08L (9 + 1.18).

I message them that 1.18L is not really my money, I have to pay it to the government. They acknowledge, and ask me to pay to the government first, fill in the returns, and then they will release it.

Now this wasn’t a death sentence for our cashflow, because I have a small rainy day fund, but this is the sort of thing that makes it hard to do business in India. First, govt takes 10% and now have to let go of 18% more (for a total of 28%), and then wait for the money to come back later (at times > 12 months).

Although this too would have been fine, without much loss of productivity, but now once I do file a return, the client wants a screenshot, then they take a couple of weeks to release money, all this while we have to keep following up for money they owe us.

Most of my clients are a great bunch of people who don’t pull this sort of nonsense, so I was unaware of this practice. When I enquired with other people about this, I was surprised to find others had to deal with the same thing.

Some vendor would have taken GST and then not deposited it, which means the customer doesn’t get input tax credits, which means they essentially paid 18% more than what was promised. So they start putting these kind safeguards.

Simulate this all over the economy, and no one really trusts anyone, killing a lot of productive time and filling it with unproductive work.