We strive to be the Best GST Consultant in India and accordingly, we keep on updating our clients through various articles and newsletters. Small and medium-sized enterprises commonly known as SME or MSME’s contribute a lot to the Indian economy and are considered as the backbone of the Indian Industry. Here through this blog, we try to brief you about the benefits of GST for SMEs. Busineowners who want to file annual GST return, for this purpose they can get references from nearby well-known GST consultants. There are many rumors against GST being harmful to the MSME’s, here we try to clear the misconceptions of the public at large.
In a developing country like India, the government collects most of its tax revenue indirectly from its people when consumers purchase goods or avail services. The contribution of direct taxes in the GDP of India is lesser due to the unequal wealth distribution pattern of the economy. GST has been a mixed bag of opportunities and challenges, especially for SMEs. Here are a few benefitting aspects of GST for SME’s.
- GST was launched with a tagline and motive of One Nation One Tax and to make the indirect tax regime simplified, uniform, and harmonized under a single-window tax mechanism. GST has eliminated strict demarcation between goods and services.
- It has also made ‘Supply’ a single point of levy of taxation which leaves no space for ambiguity. This helps in reducing legal battle which was prevailing in the old regime due to multiple taxable events of various taxes and reduces GST litigations. This also helps a layman running small scale business to have a working knowledge of this user-friendly taxation system.
- GST has a uniform tax rate throughout India based on HSN code for various goods and services, as compared to the earlier regime, where the tax rates were different across India and thus supplier of one state had the benefit over others due to lower tax rates. This also enables an SME supplier to expand its operation on the PAN India level as he can compete on his rates due to tax neutralization. GST was brought with a motive to make tax calculation at the multiple stages of the supply chain easier and to achieve ease of doing business.
- Due to the free flow of input credit, GST eliminates cascading effect and double taxation which happened in the old VAT and Excise regime as excise duty can’t be set off against VAT. As there is a common portal for filing returns and common law across states, it makes the system more transparent and structurally less complicated. Also, several taxes at the Central level as well as at State level are subsumed in GST such as VAT, Excise duty, Service Tax, Entry Tax, CST, etc.
- The Composition Scheme under GST is one of the best alternative available for SME’s to pay GST at a fixed rate and file only 5 returns, instead of maintaining various documents and filing multiple returns. This helps a lot to SME’s with turnover up to Rs. 1.5 crores to save on their time, efforts, and cost by avoiding monthly compliance services and GST litigation services.
- Due to no state boundary and removal of check posts, the trade has become more seamless. The movement of products from one state to another has become simple and helped businesses by saving time and transportation costs.
- GST is an IT-based compliance-oriented system which is also helping business save their time and efforts. There is effectively no need to visit the GST department as most of the things are technology-driven and can be done online sitting anywhere in India.
- GST audit by CA is no longer required for the year 2018-19 and 2017-18 thus providing huge relief for SMEs. Further, for the next year onwards, it will be mandatory only for a person with a turnover of more than Rs. 2 crores, thus providing relief to all the small businesses having a turnover less than Rs. 2 Crores.
- GST has bought immense relief to many service providers, traders, and manufacturers as they can now supply goods or services across India with single GST registration, unlike earlier regime where multiple registrations were mandatory. Even for exporters, the process has become so simpler to export without payment of taxes by filing self-declaration namely LUT as per GST laws.
- Litigations mechanism under GST is quite simpler as compared to earlier laws as the entire process is online and time-bound, which helps in delivering timely justice, reduced cost for GST litigation services and removes corruption as well.
There are certain myths or rumors across the country regarding negative impact of GST on small business, however, thru this article, we tried to provide positive insights of GST on SMEs. We want to remember you that the government is also trying to make income tax return filling online simple for the current financial year by introducing new income tax reforms Faceless assessment, Faceless Appeal, and Taxpayer charter.
We hope you liked this article, for any query or clarifications, please feel free to reach out at info@pgaca.in