Small businesses drive the economic growth of the country and contribute significantly to the GDP (gross domestic product) of India. When the Goods and Service Tax or GST was introduced in the country, several small businesses were not comfortable with this reformed form of taxation and considered it to be constricting and cumbersome too. But several small and medium enterprises (SMEs), both existing and new, stand to benefit from the introduction of GST. Also, the process, as well as GST registration documents, are easy to arrange and can be implemented easily too.
GST was introduced in India in the year 2017, on the 1st of July to be exact. This tax is an indirect tax and is a single tax imposed in place of several different ones previously.
Some of the positive impacts of GST on small businesses include-
- Entire Taxation System is Simplified
One of the major positive impacts of GST is that it has simplified the entire taxation system. Having several tax compliances, as was the case previously, can be time-consuming and take up a lot of the resources of any business too, which can be a burden, especially for start-ups and small businesses. GST does away with all the varied taxes which were existing on a Central and State level and instead is a uniform tax that is levied on services and goods alike all over India. This makes the taxation system manageable with fewer tax authorities and faster submission process.
- Process of Launching New Businesses is Easier
Before GST, every State had a different taxation system and if a new business was set-up with operations in several states then the business owners had to register with every State’s sales tax department in order to operate in that State. Multiple registrations meant multiple registration fees and different rules and regulations from one State to another. This bothersome process has paved the way for GST which has a centralized registration process. This will help new businesses to readily operate across states and expand easily too.
- Threshold Limits for Businesses is Increased
VAT payments post registrations were compulsory for businesses that had an annual turnover of Rs 5 lakh or more. These rules have been relaxed as the threshold limit for businesses to register and pay tax has been increased to those who have an annual turnover of Rs 20 lakhs or above, which is a big relief for start-ups and new businesses. Additionally, as per the new GST structure, there is an option of lower taxes for startups and small companies who have an annual turnover of INR 20 to INR 1 crore. This scheme is termed as the composition scheme and it exempts startups from the tax burden.
- Cost of Logistics is Reduced
Previously the tax laws were such that vehicles that passed across borders of various States had to stop at checkpoints and pay border tax or octroi. This was a hassle for transportation businesses and those that involved regular operations across the border since they had to wait for long in the queues at these checkpoints plus fill out paperwork and pay taxes for cross State-border entry. With the introduction of GST, these taxes were done away with and bought down the cost of logistics for businesses by nearly 20% which is a great deal for small businesses. Also, the relaxed taxes will help to improve business opportunities across States, allow faster movement of goods and help expand businesses.
- Elimination Between Goods and Services is Reduced
Earlier there were different taxation regimes for businesses that provided services and those that made or dealt with goods. GST has eased this entire process by eliminating individual service taxes and VAT and having a single, uniform tax that will be calculated for the final total, not individual products or services. Small businesses save time previously spent on including various tax details on the invoice and can even take advantage of the tax incentives.
So, get your GST registration documents ready and enjoy the benefits of the positive impacts of GST on your small business!