The Goods and Services Tax (GST) reform has had a significant impact on the market for goods and services in India. If you own a business, or plan on starting one, you may wonder how the GST rate will impact you. Here is a guide on everything that you need to know.
It helps you save time with simplified calculations
Before GST, as a business owner, you had to keep track of a number of different taxes and payment timelines. You might have even had to hire a team of people to look into, and take care of your tax filing and documentation. By consolidating all indirect taxes under one umbrella, GST makes it a lot easier for your business to calculate taxes and stay on top of tax payments.
What is more, you could find that the cost of running logistics and operations has been significantly reduced. Once you get used to the new system and understand how to stay compliant, the journey will become a lot smoother.
It offers concessions to small businesses
Previously, the threshold beyond which your small business would have to make a VAT payment varied from state to state. This was especially complicated if you operate your business in multiple states. Under the new regime, however, you are not required to register for GST if you have a turnover less than Rs.20 lakh and you operate within the state. If you have a combined turnover of less than Rs.75 lakh, when you opt for the compensation scheme under GST, as a trader you will have to pay 1% tax, as a manufacturer you will have to pay 2% and as a restaurateur, you will have to pay 5%.
It may lead to a hike or slump in certain product prices
Certain products will be more expensive to purchase for the consumer. For example, in Maharashtra, the tax on plastic items has been raised from 18.5% to 28%. On the other hand, Steel utensils have become cheaper, with tax reducing from 18.5% to 5%. Depending on the industry you operate in, you may find that your selling price has increased or decreased due to GST. This may eventually have a positive or negative impact on your revenue.
Additional Read: Advantages and disadvantages of GST
It has an online credit system to counter fraud
As an online taxation system, GST is replacing manual filing systems intrinsic to the old tax regime for the better. This means that tax fraud is easier to identify and there is more transparency and accountability in transactions. Also, any errors you may make while filing GST returns are easier to correct.
It contributes to the ease of starting or expanding your business
Earlier, starting a new business meant getting a VAT registration and service tax registration, to name a few tax documents that varied from state to state. This hassle was exacerbated if you planned to operate your business in multiple states. Now, a single point of registration makes registering your start-up a lot easier. What is more, in a bid to increase cross-border business, GST input credits have been made available for all in-state and out-of-state purchases.
With these factors in mind, you can evaluate the impact of GST on your business. Make sure you stay updated with GST news and file GST on time to keep your business compliant.
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