The Goods and Services Tax, which is better known by GST, is being advertised by the government as one of the biggest tax reforms in the history of the Indian economy. However, even though it seems promising with its simplification of the current taxation structure and elimination of double taxes, etc. it is important to know how it’s going to impact the SMEs of India.
Ease of Doing Business
Under the current system, every new business has to get a VAT registration from the sales tax department. Thus, if you are doing business in multiple states then it can be a big hassle to deal with the different registration process and associated fees, etc. of these states. Since the VAT applicable on a certain product can also vary from one state to another, it can also be a problem. So, say if you are selling mobile phones in different states, then it’s possible that you have to sell the same product at a different price depending on the state.
The Goods and Services tax will be the same for every state. Thus, you won’t have to worry about calculating different prices for your products. Plus, GST will also eliminate other indirect taxes such as central sales tax (CST), service tax, etc. Under the GST regime you will only need to pay only one tax for the state you are operating your business in, called SGST (State GST), and one for the central government, called CGST (Central GST).
GST will also allow you to offer your products at lower prices due to the elimination of double taxes. The repeat taxes applied on a product can be claimed by you in the form of Input Tax Credit if you are GST liable.
Preparing for GST
Unless preparation is done in advance, working under the GST regime can become really difficult for you as an SME. Thus, it’s better to get started as soon as possible.
The first thing you must do is ascertain whether you are liable to register for GST or not.
The government has linked the aggregate turnover of a business with the GST liability. So, if your annual turnover is higher than the threshold limit then you have to register for GST.
The aggregate turnover requirement for GST registration is given below:
|Liability to Register||Liability for Payment of Tax|
|North East India||Rs 9 Lakhs||Rs 10 Lakhs|
|Rest of India||Rs 19 Lakhs||Rs 20 Lakhs|
However, getting your business registered is only the beginning. There are many things you need to make yourself familiar with, such as Input Tax Credit, the filing of returns, and issuing invoices.
Depending on your business you will need to file GST returns on a monthly basis, and also keep a track of your stock and issued invoices to claim input tax credit.
How to Make the Transition Easier?
There is a slew of changes that the GST regime will bring in the current business industry. Dealing with them all can be extremely difficult on your own. Thus, it’s better to hire a good CA or tax consultant.
Another good thing that you can do is subscribe to an invoicing and expense management program that is GST compliant. It will help you create invoices that in line with the GST standards, and keep a track of your inventory and sales.