Addressed as the biggest tax reform in India, GST has been rolled out at the national level in July 2017. Although it is projected as more transparent and integrated tax system, with robust system infrastructure, yet businesses have to buckle up for more tax compliance.
Impact on Small Businesses:
Small businesses in India vary from trading to restaurants business to small service providers to even the start-ups. Where most of the taxpayers from such businesses comply with basic taxations such as state level VAT and service tax, with the implementation of GST the compliance will be more challenging to such businesses. GST being the uniform tax in place of state level VAT, service tax, excise duty and few of the customs duties, a taxpayer who falls in any of these categories would’ve to comply with GST regime to avail its benefits.
GST comes as troublesome to small taxpayers as they’ve to go through challenging procedure to both existing and new ones. GST registration can be considered as deemed mandatory because, without registration, one won’t be able to claim the tax credit and even the older ones, if there’s any. Apart from registration, other challenges are updating of accounting software, understanding of basic concept for invoicing and related procedures, and the GST return filing. With minimum 36 returns in a year, tax payers need to be on their toes for this heavy procedural part. Since the act is new and latest, it will take time to understand the concept, and the taxpayer will need professional help which will give rise in professional fees too.
What small businesses need to do and how they can prepare for GST?
To cope up with such challenges, taxpayers need to deploy additional resources and this comes as an additional cost to them.
Small businesses need to update themselves with latest accounting software and deploy dedicated resources for having a good command on the procedural part.
Since GST is a two-way approach, documentation is one of the major areas that need to be strengthened by every taxpayer. It will include proper follow-up with transacting party, as returns of both the parties will be cross tallied electronically. There should be timely filing of returns, as refunds, if any, can be claimed only after return filing and considering the compliance rating of the other party.
Further, since the complete process right from registration to return filing to tax payment will be done electronically, robust and up-to-date online system should be in place and this might add to the infrastructure cost of the taxpayer.
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