The Impact of GST on India’s Small Business Owners (Rank Princess – SEO)

GST is an initiative by the Government towards the reduction in the number of taxes. It has been receiving quite a positive response so far. Small business owners have had major positive impacts on their businesses.

If you have joined the MSME (Micro, Small and Medium Enterprises) ecosystem recently or have been operating in this sector in the last one year, then the term GST (Goods and Services Tax) shall not be new for you. Below is a quick glance as to what this tax is all about and how it is going to impact you, as a small business owner –

GST Explained

The Goods and Services Tax was introduced by the Central Government last year. It is a form of indirect tax that focuses on removing any and all kinds of tax barriers between the states of India. This taxation scheme aims at creating one single tax umbrella for the entire nation. The GST is based on consumption tax wherein the taxable transaction is supplied to the existing taxable event of manufacture, provision of service or sale of any good.

Who is liable to pay the GST?

If you fall under the following categories of tax payers, you are liable to pay the Goods and Services Tax:

  • Service Taxpayer
  • Central Excise tax payer
  • VAT or Sales Tax payer
  • Entertainment Tax payer
  • Luxury Tax payer

How is it going to impact your small business?

The Goods and Services tax is going to affect you, as a small business owner in the following ways –

Impact #1: Easy process of starting your business

All thanks to this tax, all small businesses can now rejoice! As per old rules, when you had to start a small scale business, you would have to have a VAT registration that is issued by the state sales tax department. Since every state has its procedures, the form and procedure vary as well. But now, with the introduction of GST, there is uniformity in the process. GST has introduced centralised forms and procedures of starting the business.

Impact #2: Reduction in logistical costs

If you have ever gone on a road trip from one state to another, you must be familiar with the number of toll taxes that come up at each highway. Same happens when small-scale businesses import and export goods from one state to another. There was a lot of time, effort and money spent on these cross-border toll taxes. Now, with the introduction of GST, all of this will be eliminated. Interstate movement will now become a lot cheaper as the majority of toll taxes have been removed.

Impact #3: Simple tax processes

This is the best impact GST could have on small business. With high business volumes, it becomes a daunting task to manage so many varied types of taxes. Not anymore with GST. With this new tax, a lot of taxes are being amalgamated as one Goods and Services Tax. GST will integrate all the main taxes across states thus making the tax paying process straightforward and easy.

Above highlighted are the three major impacts that GST has on small businesses in India.

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The Impact of GST on India’s Small Business Owners (Rank Princess – SEO)

While the passing of the Goods and Service Tax (GST) bill was a much-celebrated accomplishment of the incumbent government, it has managed to transform the scenario for small businesses across the country drastically. The new system promises to score far better regarding transparency and less paperwork. Moreover, it requires far greater compliance as well.

To begin with, the owners of relatively smaller commercial services are finding it considerably difficult to migrate to the freshly released GST format. The primary reason for the same is that they have been unable yet to invest in hardware and software, and are still relying on old-school methods of manual calculations and hand-inscribed account journals painstakingly maintained over the years.

The pressure on these owners has increased manifold owing to the government’s order to have such businesses filed for tax returns in the new GST format by July 1, 2017. This deadline has led to shop-owners frantically rushing from pillar to post to complete all the necessary formalities before the stipulated date.

For small-time establishments which are yet to evolve in the variety of their products and services, or in the size of their clientele, the latest online format poses a major inconvenience. This is due to the need for thorough orientation, a precise understanding of the financial mechanism and greater work regarding employing third parties and agencies to handle the affairs arising for implementing GST. Without comprehensive elucidation in these matters, minor business owners will have no dearth of confusion in uploading documents and submitting them.

For others, the e-way bill, which aims to move goods from one point to another, is proving to be a rigmarole of sorts because of the incessant form-filling. Not only does it have to be filed electronically on a common platform, but there are also multiple times one has to repeat the procedure for various events.

In light of the multiplicity of forms being a bane in India, GST has, at least initially, only fuelled the fire. The shipment of goods has been rendered into a complicated, cumbersome process. Also, because each business will try to prop up their resources on the portal, the traffic on the same will skyrocket, increasing compliance costs.

As though this was not enough, there are now problems arising out of the system of unique e-way bill number (EBN). If one single vehicle carrying many goods is crossing a state boundary, it is subject to scrutiny and detainment by authorities. This remains irrespective of whether the vehicle is merely passing through or intends to halt and unload. Stopping vehicles at state entries and commercial tax checkpoints would delay delivery and cause a loss of revenue for the concerned businesses.

Fortunately, however, tax consultancy experts report that once the nascent conflagration has died down and once business owners grasp the concept of the GST format, problems will be resolved and the system will come back as better and more secure.

So the wait for betterment continues.

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