With the launch and implementation of the most influential tax reform the country has ever seen in 2017, GST turned a lot of heads in anticipation as to what was about to come and how it would impact the Indian economy. Businesses all across the country were anxious as to how this behemoth tax reform implemented by the Government of India was going to impact their profits and revenue.
While the tax reform has been a topic of debate since its launch, it has brought along a fair share of advantages for small and medium scale businesses, which has helped them in growing at a faster pace. The introduction of GST registration for businesses was primarily aimed toward eradicating any types of indirect taxes that medium scale businesses had to pay for operating in India. This tax reform has been beneficial to small and medium scale businesses, but to truly understand how it was able to achieve this, let’s take a look at how exactly GST works first.
How GST Works?
Eradicating any types of indirect taxes that were used to be imposed on businesses, GST brought along a Two Tax system, which would comprise all types of taxes necessary for businesses to operate under its umbrella. The two types of taxes in GST tax reform were Central Goods and Service Tax (CGST) and State Goods and Service Tax (SGST). Both of these tax systems would incorporate all types of indirect taxes under them, to offer businesses with a fixed percentage of taxable revenue.
The purpose of this tax reform was to eliminate the hassles small and medium scale businesses had to go through for registering and filing for different types of taxes before the new tax regime. This has helped businesses all across the country in realising their true potential in churning out profits and growing at a very fast pace.
Benefits of GST on Medium Scale Businesses
While the implementation of GST took some time for businesses to get used to, it ultimately turned to their benefit, as a single tax system for medium sized businesses was able to open a lot of opportunities for them. Here are the biggest benefits GST registration brought along for medium scale businesses:
1. Streamlined organisation of unauthorised sectors
Before the GST tax regime, a lot of industries such as construction, textile, etc., were unregulated due to a very complicated taxing system, which caused them a lot of troubles. These are industries that have the highest amount of medium scale businesses. However, with the rollout of GST filing, a consistency and organised structure came along, which has provided a much needed fluidity for medium scale businesses in these previously unregulated industries. Moreover, the financial trade in these industries has also seen a huge surge, as they have been able to levy some good amount of financial provisions provided under the tax regime.
2. Composite Scheme
The introduction of the composite scheme is, perhaps, one of the greatest benefits imparted on medium scale businesses across the country. GST filing has basically reduced different types of compliances businesses had to follow, along with a significant reduction in taxes.
Under this scheme, medium scale enterprises and businesses are now only liable to pay a fixed percentage of their annual turnover as taxes, which are distinguished as follows:
- Businesses recording an annual turnover of Rs 1.5 crores or more are liable to pay the flat GST (18%) as tax, and can only file for a single return.
- Businesses recording an annual turnover of Rs 50 lacs or more are liable to pay 6% as their GST as opposed to 18% in the previous taxing system.
Medium scale businesses usually operate under the second point, in which their turnover usually falls between 50 lacs to 1.5 crores annually. This means they are now paying a relaxed rate of taxes, which has helped them in saving a lot of capital annually.
3. Convenient Online Process for Compliance
GST operates on a single portal, and all of the necessary updates regarding the compliance and regulations for the industries are present on the portal. With the GST regulation online, medium scale businesses no longer have to worry about tracking or missing out of any of the compliances and regulations while filing for GST. All they have to do is to register on the GST online portal, and only pay the taxes they’re liable to pay. Previously, businesses had to register for different types of taxes to ensure they're meeting all the regulations.
4. Boost in the Threshold for Registration of Businesses
Before the GST tax regime, businesses had to take care of VAT implementation on their goods and services, along with various other variables like different state taxes based on the state’s taxing model, even if the business had an annual turnover of less than 10 lacs.
With GST, this process has been completely eliminated, as SGST for all the states (with few exceptions) are fixed. Even with the exceptional states, their rates have been finalised by the state and approved by the central government. Hence, any business reporting an annual turnover of less than 20 lacs is now exempt from paying any GST, and businesses with an annual turnover of 20 lacs to 50 lacs are paying only a fraction of GST.
5. Boost in Efficiency for Businesses
With the digital transformation of the tax paying system, there has been a significant increase in the convenience offered to businesses and customers alike for filing for their taxes. The online GST portal is ever-evolving and robust, and offers a seamless and easy to follow process for online GST filing for businesses of all kinds.
Medium scale businesses have been able to save a lot of time and resources due to the introduction of the online GST filing system, and being in the know about any updates in the compliances and regulations in their respective domains.
Q. How can a business file for GST through the online portal?
A. Open the GST portal by clicking on this link: https://www.gst.gov.in/
Register yourself as a business, pick out the GSTR forms that are relevant for your tax reporting, and fill out the information accurately. After this, you can submit the GSTr forms on the portal under your registered profile as a business.
Q. What is the GST applicable on for medium scale businesses?
A. Medium scale businesses usually record an annual turnover of over Rs 50 lacs. If your annual turnover falls between Rs 50 lacs and Rs 1.5 crores, then the GST applicable on your business would be 6%. However, if your annual turnover exceeds Rs 1.5 crores, then 18% GST would be applicable on your business.
Q. What are the different types of GST returns a business can file for?
There are a total of 11 types of GST returns a business can file for, namely GSTR1, GSTR2, GSTR3, GSTR4, GSTR5, GSTR6, GSTR7, GSTR8, GSTR9, GSTR10, and GSTR11. All of these return forms have their own distinct features.