Small and Medium Enterprises (SMEs) are the primary growth drivers of the Indian economy with more than three million SMEs operating in India, contributing to almost 50% of the industrial output and 42% of India’s total exports. A leading employment-generating sector, SMEs have provided balanced development across sectors.Also See: GST: WHAT IT MEANS FOR SOFTWARE SECTOR?
GST will augment the taxpayer base by escorting more SMEs under its scope, and will certainly pass on the burden of compliance and associated costs to them. However, eventually GST will turn these SMEs more competitive, and level the playing field between large enterprises and them. Further, these Indian SMEs would be able to compete with foreign competitors from cheap cost centres such as China, Philippines, and Bangladesh.
Other than these, here are some more ways in which the implemented tax regime is likely to impact businesses, especially startups and SMES.
Ease of Beginning a New Business
Any new business needs a VAT registration from State’s sales tax department. A business running in many States needs to face lots of issues with respect to the various procedures and applicable charges in every state. GST will attain a consistency in procedure and centralised registration that will help to start business and its expansion in various States without any trouble
Exemption for New Startups and Small Businesses
According to the current structure, any business that has a turnover of more than Rs. 5 lakh needs to get VAT registration and pay VAT. GST will increase the limit, upto Rs. 10 lakh and further, organizations with turnover between Rs 10 and 50 lakh will pay tax at lower rates. This will bring relief from taxation rates to recently settled business.
Easy Taxation System
Currently, a startup invests a considerable measure of time and energy to deal with the distinct taxes at different points. Sticking to different regulations at different States make the procedure exceptionally uncertain. With the introduction of GST, the complication of the procedure will be reduced by incorporating all the expenses and by making the tax paying way less hard.
Relief for Business in Both Sales and Services
Businesses like restaurants, which had to pay both sales and service tax collection, need to figure the VAT and service charge on both ends independently. This makes the estimations procedure exceptionally complex. GST won’t make difference between services and sales, and in this way the expense computation will be done on clustered amount.
Decrease in Transportation Cost Across the Country
Many transport vehicles have to face delay in movement across States run because of small border tax and checkpost issues. Interstate development will get to be cheap and fast, as these duties will be wiped out. GST will cut down expenses related to keeping high stocks, as there will now be no disorder in the movement of goods across states.Also See: QUALITY ASSURANCE PLAY A KEY ROLE IN THE TRANSFORMATION CYCLE
However, once GST is implemented, most of the current challenges of this industry will be a story of the past. India will become one single market where goods can move freely and there will much lesser compliances to deal with for startups.