The Goods and Services Tax (GST), since it launched by the Government of India in 2017, has completely revolutionised the way the Indian tax system works. Apart from simplifying the return filing process for businesses and bringing in greater transparency, GST has also paved the path for minimising tax-related corruption that exists in the country.
For SMEs who are punctual and disciplined in following the procedures laid down by the GST Council, gst India holds a great opportunity to streamline their financial processes and get the maximum tax benefits.
In this article, you can explore how GST can help small & medium businesses in India in streamlining their processes.
Single Common Registration Online
Previously, businesses were required to register under various tax imposts separately. For example, an SME doing business in Maharashtra needed to separately register for a chain of taxes such as VAT, excise duty, sales tax, service tax and more.
GST subsumed all the above taxes into one single GST registration. Even though businesses still require separate registration for different states, the entire process can be done online along with e-verification and authentication.
Further, the actual GST payable by SMEs is split into various parts- SGST, CGST and IGST- however, with one single registration required for all of them. The entire GST registration process can be managed online and digitally signed, thus reducing the lengthy paperwork. If you’re an existing taxpayer, you will be automatically migrated to the new system with minimal hassle.
Ease of Doing Business
The broader aim of GST has been to simplify the indirect tax system in India. Apart from removing the cascading effect of the tax, GST removed several other pre-existing taxes like service tax, central excise duty, value-added tax or sales tax, entry tax, and more.
What this essentially means is that the GST has brought greater ease in doing business for all. Further, the faster process of online return filing has made it more straightforward and hassle-free for companies.
GST brings in far more simplicity while decreasing the cost of compliance for small and medium-sized enterprises (SMEs). Some of the examples of this include-
- As per gst latest news, tax exemption limits for businesses have been raised to ₹40 lakh from the erstwhile ₹20 lakh.
- A business with a turnover of up to ₹50 lakh can pay GST at a rate of 6 per cent instead of 18 per cent.
- SMEs businesses with a turnover of up to ₹1.5 crores get the benefit of a composition scheme wherein they need to pay only 1 per cent flat rate and file only one annual return.
The GST thus eliminates several challenges and bottlenecks that regularly occurred during the old tax regime. Higher transparency under GST allows more people to start their own business and enjoy the convenience of streamlined financial processes.
More Businesses are Tax Exempt under GST
One of the significant advantages of the GST mechanism for SMEs is that businesses earning up to Rs 10 lakhs annually do not need to file a GST return. Also, a simplified registration process and a more straightforward tax policy make the GST system a significant enabler for SMEs.
Unlike the earlier taxation structure where every company that made more than Rs 5 lakhs had to file a tax return after GST more small businesses are exempted from paying tax. These exemptions are also good for the economy as it increases the incentive for new entrepreneurs to establish businesses.
Improved Logistics and Faster Delivery of Services
Under GST, there is no entry tax charged for goods manufactured or sold in any part of India. This results in expedited delivery of goods at interstate points and toll check posts.
Thus by abolishing various entry taxes levied at different interstate tolls, GST (Goods & Service Tax) has significantly reduced the expense of transporting goods across the country allowing SMEs to move their goods quickly and deliver products faster at a reduced cost.
Replacing as many as 17 levies and several cesses with a single tax structure, GST has made tax filing a much simpler, systematic, and streamlined process. Further, it has enabled SMEs to simplify their financial systems and channelise their resources towards faster business growth and development.