The Goods and Service Tax (GST) implementation will have an enormous impact on the small and medium businesses, large enterprises and startups in India. GST will bring the entire nation under one indirect taxation to avoid multiple & complex taxation system.
With GST under implementation, you do not have to run to tax offices to get various registrations under Excise, VAT, Service tax. Taxation has become simpler by online portal registration. Simply run a gst no search to get started.
But there are both positive and negative effects of GST on you. Let us understand.
Positive Effects On Businesses
Ease Of Doing Business
In pre-GST regime, you had to register with various tax authorities for different tax payments, maintain multiple documents and file tax returns to different authorities. With GST implementation, most of the indirect taxes of the country were subsumed into one. Now, businesses need only apply for a single registration, i.e. GST.
Cascading Effect Reduction
The double taxation avoidance system has reduced the cascading effect. In the pre-GST era, a fee was imposed on previously charged taxes because of taxation at every stage of production. With GST levied at the destination, it will reduce this tax mishap to a minimum.
Reduced Tax Burden
Businesses or startups with a turnover of less than Rs. 20 lakh are exempt from registration under GST. They can volunteer to register if they wish. Also, the composition scheme reduced the tax rate of small businesses with a turnover between Rs. 20 lakh to Rs. 1 crore.
Reduced Logistics Cost
The digitisation under GST has simplified the physical transactions of goods and services.
Territorial Ease For Business
GST had simplified the inter-state tax complications which prevailed before. All states in the country will follow only one tax – GST. This will lead to the expansion of interstate business in India.
Elimination Of The Distinction Between Goods And Services
It imposes a uniform tax on goods and services and categorises the commodities as per tax slabs.
Removal Or Reduction Of Customs Duty
It will make businesses more competitive in foreign markets. This will open gates for international trade.
Negative Effects On Businesses
Tax Credit
You will receive the tax credit only if the person before you in the supply chain has paid the taxes and filed the return. Even if one supplier in the supply chain before you doesn’t record the GST return, you will not receive TCR and will have to pay the entire 18% tax.
Reverse Charge Mechanism
If you are doing business with an unregistered dealer or supplier, you will have to pay GST on this purchase. You also have to issue an invoice for the purchase from the unregistered seller.
Input Tax Credit (ITC)
Under GST, ITC can only be availed by the buyer if the supplier has paid the tax on a window of tax.
Large Businesses
GST will cost you extra money that you need to pay on tax. It will have a small negative effect on the profitability of your business.
Dual Tax Rate
GST will operate as CGST and SGST for central and state, respectively. Hence, for local suppliers of goods and services, it is an increased burden of maintaining account books and additional audits from tax authorities.
Taxation
GST is a value-added tax along with an income tax, so the “circular flow” is taxed twice over both income tax and GST, which is bad for business.
Increased Compliances
According to GST rules, a small scale manufacturing company with operations in only one state will have to file 37 tax returns in place of 13. This will increase the compliance activities for the minor industries.
State-Wise Tax Returns
Tax returns are to be filed for every state where the company is operating or doing business. It means, if the company is working in more than one state in India, then it has to file multiple tax returns in a year.
Final Thoughts
You can successfully handle the change in tax scenario for your business if you know the GST rules and regulations explicitly. File your gst returns before the deadline to avoid hefty penalties.
The entire mechanism will create a smooth tax collection and a transparent streamlined structure, with lower sales tax rates overall. This is an enormous relief to those who are about to start their business.
