Is GST registration boon for small businesses?

To operate with a small business an owner can proceed with just a GST registration. It is not obligatory for the owner of small businesses with a turnover below Rs. 40 lakhs to get recognized for the GST registration requirements till you are an owner of the small business from the north-eastern states where the threshold limit to get mandatory registration for the GST is Rs. 20 lakhs. Since GST was aimed to bring all the indirect taxes under a sole umbrella, the previous hassle of tax cascading (tax on tax) has been eradicated. This interprets to more direct savings for small businesses. Now, the introduction of GST has smoothed the playing field by exempting small traders and service providers from paying taxes up to a GST threshold limit of Rs 40 lakh. Let us discover how and why GST is demonstrating to be an advantage for small industries in India.

GST is pretty procedural law. Having any Government recognized registration adds to the recognition and is easier to do business or seek financial help from the bank. Some businesses would only agree to do trade with you if you have a GST registration. But the requirement varies from business to business. Giving the nature of GST and howsoever informal it might seem, GST is not at all easy to understand the law.

GST benefits

Eradicating cascading consequence of taxes, Tax rates will be somewhat lesser as the tax base will broaden the smooth flow of Input tax credit, Prices of the goods and services will drop, efficient supply change management, Promote shift from un-organized business to organized business.

• Compliances are simpler & inexpensive

GST brings in easiness while reducing the cost of compliance which acts as a boon for micro, small, and medium-sized enterprises (MSMEs). For the MSMEs, the GST exemption limit has been outstretched to an annual turnover of Rupees 40 lakh from the erstwhile Rupees 20 lakh. Businesses with a turnover of up to rupees 1.5 crores also enjoy a composition scheme in which they pay only 1% flat rate and file only one annual return. Service providers with a turnover of up to Rupees 50 lakh can pay GST at a rate of 6% percent as a replacement for 18%. These business-friendly initiatives have profited over 35 Lakh enterprises. The government is also working on an initiative for letting more than 90% of taxpayers to file quarterly returns.

• Ease of doing business

GST has been the key facilitator in streamlining the indirect tax system in India. While eradicating the cascading effect of the tax, GST has done away with several preceding taxes like CED, Service Tax, CVD, VAT or Sales Tax, Central Sales Tax, Octroi and Entry tax, etc. Consequently, it has carried ease in doing business for all. Additionally, as return filings are done online and inter-state movement of goods and services has become speedier, it has become reorganized and hassle-free.

• Digitalization, a greater scope to magnify small businesses

The enactment of GST has brought micro, small and medium-sized enterprises (MSMEs) under the realm of digitalization, which has assisted in fast-track digitization route in India. Digitalization leads to transparency with additional benefits, such as reduced deceptions and chances of error. This has brought about an eco-system that is advantageous for the growth of small businesses in India.

• The disorganized sector is controlled under GST era

Before the enactment of GST, it was frequently realized that certain industries in India like construction and textile were mostly unorganized. Under GST, nevertheless, there are requirements for online payments and compliances and for availing of input tax credit only when the supplier has acknowledged the amount. This has brought in accountability and regulation to these small businesses.

• GST act as a boon to MSMEs

Micro, small and medium-sized enterprises (MSMEs) are now less reliant on tax experts when compared to the earlier administration, due to an easy return filing system has taken place. Explanation of the composition scheme and introduction of quarterly filing opportunity for taxpayers having turnover below Rs 1 crore 50 lacs was a wise judgment.

• The advantage of input tax credit (ITC) will add value to the small business

For many small businesses in India, the big improvement of GST is that it is a value-added tax and therefore imposed only on value addition. But there are some immediate challenges that are to be faced by the small and medium-sized businesses with respect to the greater compliance requirements and at the same time, they get the benefit of input tax credit and also much larger market to expand their business. Therefore small business always gains from GST.

• Streamlined procedure for compliances

One of the topmost benefits of GST is that the taxpayers can register by complete GST registration documents, file returns, and pay taxes all online with the GST portal. There are systems in the procedure which will compare and match the invoices of the supplier and buyer. This mechanism will efficiently control tax fraud and tax elusion. At the same time, it will ensure a higher flow of business to the national economy, in a controlled and organized manner.

Conclusion

Even as GST guarantees a variety of assistance, its true value can ensue when companies invest in software solutions for complete business process mechanization. There exist a few worthy GST compliant software products today that systematize a company’s accounting from billing to GSTR filing procedures in less time. The compliances under GST are many and if you can’t handle all the compliance work on your own then you would be hiring services of a professional. The responsibility of a professional is huge and that’s where the cost comes in. The number of compliances means a lot of work which means you would have to bear the cost. Look for someone who appears to have an experience and can handle your work.        

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