As the biggest tax reform in India was launched in 2017, the industries across the country were anxious about the impact it will have on their business. As the tax regime of GST rolled in, businesses across the country were strapped in for what was surely going to be a roller coaster ride.
While GST registration for businesses sure had its fair share of advantages and disadvantages, GST has surely benefitted small and medium enterprises (SMEs) and startups across the country more.
To understand how GST has added to the benefits of SMEs and Startups, let’s first understand how exactly does GST work.
Integration and Implementation of GST
GST was made to get rid of all types of indirect taxes that were imposed on businesses and customers. To eliminate these indirect taxes, GST battled them by incorporating a Two Tax system, in which Central and State taxes incorporate all types of tax under their umbrella.
Under this new tax reform, small businesses no longer had to worry about going through with the hassle of taxes on taxes (tax cascading), which translated into small businesses scoring more direct savings.
Different Benefits GST has Brought for Small Businesses
GST has granted a multitude of benefits to small businesses and startups. Here are the most influential benefits that have propelled SME and startup industry to new heights:
1. Threshold for Registration Boosted
The VAT implemented on businesses that reported a higher income than 5 lacs, along with many other additional variables like states deciding taxes on businesses and service taxes on businesses with less than 10 lacs turnover.
With GST, small businesses don’t have to worry about any of these elements anymore, as small businesses and startups have become tax-exempt until their turnover is over 20 lacs.
2. Unauthorised Sectors have Become Organised
Some of the industries in India have been unregulated due to a complicated taxing system. But it has now been regulated and organised, so these industries have found some consistency in regulation. Industries like textile and construction now have been introduced to the common regulations and compliances they have to follow. Added to this is the financial provisions that have helped these industries in boosting trade.
One other benefit that came out from this for small businesses was the composite scheme. GST filing has reduced the taxes and all types of associated compliances along with them for SMEs and startups. Under the composite scheme, small businesses are now liable to only pay a certain percentage of their turnover as taxes. Here are the primary regulations that the composite scheme offers:
- Small businesses with a turnover of over Rs 1.5 crores can only file for a single return, and have to play the flat GST on their turnover.
- Small businesses with a turnover of over Rs 50 lacs now only have to pay 6% of GST on their turnover (as opposed to the general 18% figure)
3. Processes for Online Compliances have become easier
With GST registration online, small businesses can now very conveniently file for their returns, with the GST online portal. SMEs and startups no longer have to register for different types of taxes to ensure they’re meeting all the regulations, as GST is a centralised system.
4. Starting a Business Has Become Much Easier Now
Businesses across the country no longer have to worry about getting registered under different types of tax systems like VAT, service tax, etc. Moreover, issues like different state registration has eased due to GST registration as well, as small businesses operating in different states had to pay different percentage of VATs based on the states they’re operating in. It also means paying GST online for SMEs and startups can be a one and done procedure, which would mean they don’t have to worry about filing for different entities.
5. Tax-Exemption for SMEs and Startups Have Helped in Saving a Lot of Money
As mentioned earlier, SMEs and startups with an annual turnover of less than Rs 10 lacs won’t have to file for GST or claim it. They are exempted from paying any GST to the government. Similarly, SMEs and startups with an annual turnover of between Rs 10 lacs and Rs 50 lacs will be paying a lesser percentage of GST to the government.
This has helped the small businesses in saving a lot of money since the year GST rolled out. This has significantly helped small businesses in realising their true growth potential as they can now invest their money into their growth efforts.
6. Improvement in Ease of Doing Business
The main purpose of rolling out GST was to have a proper distinction between Goods and Services. This distinction was very well garnered and welcomed by businesses all over the country, as it helped them in keeping track of only the compliances that would be applicable to them. Moreover, it would also help small businesses in only paying the taxes for the product/service they’re offering. This has made it very easy and convenient for small businesses to conduct their operations now.
Paying Taxes Online Has Made Businesses Much More Efficient
The robust and ever growing online GST portal has made it very convenient for small businesses to report their turnovers and GST filing online. A lot of businesses have saved much effort and resources with paying GST online and being in the know of every update about the tax regime and compliances.
GST: How to Apply for GSTN?
GST: All the Forms Related to GST
Q. How to file for GST online?
A. You can file for GST online by going to the GST portal. All you have to do is register on the portal or sign in if you’re already registered, pick out the GSTR form you’re filing for, and follow the easy steps to file on the portal after filling in the information on the form.
Q. Who is GST applicable on for small businesses?
A, If you’re a small business generating over Rs 20 lakh turnover annually, then you will have to file for GST. If your annual turnover is less than Rs 10 lakh, then you don’t have to pay any GST.
Q. What are the types of GST returns?
- GSTR-1: Filed for monthly returns as a part of outward supplies
- GSTR-2: Filed monthly returns as a part of inward supplies.
- GSTR-3: Filed by taxpayers as a part of their monthly returns with details of returns from other months.
- GSTR-4: Filed for quarterly returns
- GSTR-5: Filed by non-resident taxpayers
- GSTR-6: Monthly returns filed by input service distributors
- GSTR-7: Filed for Tax Deducted at Source or TDS
- GSTR-8: Filed by e-commerce operators as a part of their accumulated monthly returns
- GSTR-9: Filed as annual returns
- GSTR-10: Filed when business activity is terminated permanently
- GSTR-11: Filed by taxpayers who have a UIN or a Unique Identity Number