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Impact of GST on Traders in India

  • Highlights

  • GST has brought business efficiency by restructuring supply chain

  • Simplification of indirect taxes has made trade easy for SMEs

  • Rationalisation of tax rates have resulted in wider tax coverage

  • GST introduces the concept of ‘furtherance of business’

The Goods and Services Tax (GST) has resulted in the restructuring and subsumption of different taxes, into a single, nation-wide tax structure. Traders can now experience seamlessness in many areas of domestic and international trade.

Is GST registration mandatory for small traders?

GST registration is not compulsory if the turnover is below Rs.20 lakh. Unregistered businesses cannot charge GST. However, businesses getting services from them shall be needed to pay GST in reverse charges. And would get tax credit too.

Benefits of GST

GST has contributed immensely in easing trading in India. Let’s look at its salient features:

- Business efficiency with restructured supply chain

In the former tax regime, different supply chain taxes were applicable in different states. However, with the introduction of GST, these taxes are now simplified, through the concept of ‘one nation-one tax’. This has resulted in effortless inter-state trade and thus improving business efficiency.

Additional Read: What is Supply Chain Management (SCM)

- Simplifying indirect taxes

Many complicated indirect taxes like excise duty had different methods of calculation. The existence of multiple calculation methods made indirect taxes challenging to estimate. Even in the case of domestic trade, various indirect taxes existed for different states, like OCTROI, service tax etc.

With the subsumption of all these taxes into a uniform GST, trade is now broader in India.

Additional Read: What is GST

- Rational rates

With time, Indian traders have settled seamlessly into a new, uniform tax regime. It has a multi-tier tax structure and can be divided into 5 broad categories. GST is a simplified tax regime with reasonable rates, minimum number of slabs and clear slab differences. These new rates have resulted in wider tax coverage among traders.

- Increased Registration threshold limit

GST has introduced a uniform threshold limit of Rs.10 Lakh for specified states, and Rs.20 Lakh for the rest of India. The specified states include the 7 North Eastern states, Sikkim, Himachal Pradesh, and Uttarakhand). Earlier this threshold limit varied across the country. This has helped small entrepreneurs, including startups to concentrate more on trade than compliance procedures.

GST Calculator for Wholesalers and Retailers

- Business Expansion

GST has introduced the concept of ‘furtherance of business’ that has positively impacted domestic trade in India. It has abolished the entry tax (for trade across different state borders) and opened-up India in terms of interstate commerce. Both, inter-state and local traders have benefitted from the replacement of Central Sales Tax (CST) with the IGST (Integrated Goods and Services Tax). Thus, trade expansion has become hassle-free. Quality goods manufactured in one part of the country can now be traded across the country with ease.

- World Bank’s ‘Ease of Doing Business’ Assessment

The positive impact of GST on Indian trade has reflected on World Bank’s ‘Ease of doing business’ world rankings, as well. In 2018, India was ranked 100th in the list of most business-friendly nations in the world.

Apart from the points mentioned above, GST has enabled full Income Tax Credit (ITC) on the purchase of capital goods. With the convergence of various indirect taxes into a uniform GST, compliance has reduced to 36 working hours, from the earlier 105 working hours. All these factors have resulted in the ease of trade in India.

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