As at the time the Goods and Service Tax was introduced on July 1st, 2017, it was the most significant talking point of the media, businessmen, analysts and government figures. Since independence in 1949, this is the biggest indirect tax reform carried out in India, and it is expected to have a wide range of impacts on different sizes of businesses in India. For this article, we will be focusing on its impact on small businesses and how online accounting software can cushion this impact.
Let’s have background knowledge of how GST works. It is intended to make the Indian economy a common unified market on the basis of tax payments. Straight from the manufacturer to the end user, there’s only one tax to be paid. You can think of the Goods and Service Tax as a multi-stage, a comprehensive and destination-based tax levied for every value-added. GST brings together all of the other forms of taxes such as state and local tax, surcharges, excise duty, entertainment tax, and many others.
Benefits of the GST to small businesses
There are numerous benefits of the GST to small businesses; they are even the most affected by the new tax regime.
A decrease in Tax Burden
The previous tax regime gives tax exemption to only small businesses with a 5 Lakh turnover. With GST, the exemption has been raised to 25 lakhs. This means that a large number of small businesses across India are being exempted. A small business just has to put in place a cloud accounting software to have enough proof as to their turnover when tax officers come calling.
Starting Business Becomes Easier
With the GST, the need to abide by the different tax structures in different states has been eliminated. There is now a unified tax system all over India and whatever applies to business in Karnata will be applicable in Goa or Gujarat. This simplifies things for businesses planning to open shop in new places. All of these businesses can be easily monitored via a small business accounting software.
No More Tax Distinction Between Goods and Services Industry
The ambiguity that used to exist between goods and services has been cut out by GST. This will help in legal proceedings as the ambiguity between the two sectors is being eliminated.
Improved and Faster Logistics
Before the GST, taxes have to pay at points of entry into different demarcated parts of India. This slows down the delivery of goods and services. With GST, all the taxes have been fused into one.
Of course, the GST isn’t all rosy for small businesses. There’s a learning period of the new tax structure that will send some small businesses out of business. This is why there will be a need to hire a CA and those who cannot afford one being a small businesses will have to close shop.
With cloud accounting software, you are able to easily monitor your taxes from a single source from multiple business locations. Small businesses will also face resistance from final consumers who will not be forthcoming in paying an extra GST tax on goods and services.