The goods and service tax has completely changed the traditional method of doing business in the country. As per the Indian government, this new indirect taxation system will boost the economic growth of the country in the long run. GST streamlined the whole tax structure by replacing many indirect taxes such as VAT, service tax, excise tax with a single indirect tax.
GST has simplified the process of filing tax returns for businesses all over the country, which in turn bought more accountability and transparency in the system. This new taxation reform will ultimately eliminate the tax-related corruption from the nation.
Though there has been a mixed response from the taxpayer, the majority of people support the act and are willing to make necessary changes.
GST has impacted every industry of the country irrespective of their capability and size, SMEs being one of them. Take a look at the most significant influences of GST on small and medium enterprises.
A Simpler Taxation Process
The primary reason for introducing the goods and service tax in the country was to eliminate cascading taxation. Earlier, there used to be a complicated overlap between the state tax ( VAT, purchase tax, luxury tax) and central tax (excise duty, customs duty, service tax). GST is a single combined tax that businesses need to pay on an online portal called GSTN.
One of the key benefits of having centralized taxation is that businesses will need to deal with fewer tax authorities. It saves time and effort so that they could focus on expanding their business.
Robust Online Portal
The best thing about new GST law is its online portal named GSTN, where a taxpayer can perform every taxation related task such as registration, gst payment, and filing returns with ease. The goods and service tax network is continuously improving to make the process more convenient, safe, and secure.
The online portal allows taxpayers to rectify any possible mistakes in real-time. Before the GSTN, the whole taxation process used to be time-consuming and complicated.
Easier To Start A New Business
Before the implementation of GST in the country, starting a new business was very difficult because of the complicated tax laws. As per the previous tax regime, if your business required operations in multiple states, It would be mandatory for you to register for VAT with each state’s sales tax department.
There were different tax rules for each state, and it created a lot of challenges for businesses to operate in multiple states. Under GST, it is much easier for new companies to start early and expand as taxation is centralized, and the tax rules are uniform across the country. You need to have a GST number to start a business, and you can get that by submitting the documents required for gst registration.
Increased Threshold Limit For New Businesses
Under the new GST law, A business having a turnover of less than INR 20 Lakhs does not need to register or pay any taxes. Earlier, this threshold limit was INR 5 lakhs and INR10 lakhs in some states. It has helped small businesses and startups as it relieved them from tax burdens.
Same Tax For Goods and Services
Earlier, businesses that provide both goods and services had to calculate the VAT and service tax separately. The new goods and service tax has eliminated the distinction between goods and services, and a single combined tax will be collected for both goods and services.
It allows small and medium enterprises to take advantage of tax incentives for payment on the procurement of input goods and services.
Reduced Cost Of Logistics
Doing business in multiple states was the most significant challenge faced by companies as they had to follow different rules for a different state. They had to pay entry tax at the inter-state border, which increased the overall logistics costs of the products.
Apart from these inter-state entry taxes, vehicles were made to stand idle for a long time which increased the fuel and labour costs.
Under GST, the old CST ( Central Sales Tax) is replaced by a combined tax called IGST which is composed of CGST and SGST, collected by the central government. The removal of check-post taxes significantly reduces the delay and cost of logistics.
Conclusion
After almost three years of GST implementation, SMEs have witnessed a lot of benefits in terms of expanding its business across the country. There is no doubt that it is the best foot forward by the Indian government to boost the country’s economy.
