GST was implemented on 1 July 2017 in India and marketed as a revolutionary taxation system that will make things easy for everyone. It combined various taxes into a single tax, making it easy to understand from the customer’s point of view. GST aimed to reduce double taxation and enable a transparent tax collection system. Overall, the system was designed to make the process more efficient, and it certainly did so. GST can be divided into three components which are CGST (Central Goods and Service Tax), SGST (State Goods and Service Tax) and IGST (Integrated Goods and Service Tax).
Many families in India run businesses. These can be small businesses like your grocery store, and these can also be large business houses with a group of companies. So, the main question that the business community had is what the impact of GST on their business is. We have shared more information about the same in the section below. Go ahead and check it out.
Impact of GST on Business in India
There are two types of GST in the business. If the business is trading within the state, then as per the GST rules, the business needs to pay CGST and SGST. If the business is trading outside India, then the business would need to pay IGST. Let us now look at the different impacts of GST on businesses in India.
- Easy to Calculate – With multiple taxes on the business, the businesses had to calculate and file different taxes. Many businesses had software solutions, but small businesses relied on manual work. Because of so many taxes and deadlines, there was always a great chance of error while calculating the tax. If the tax is calculated more than the actuals, then it is a loss for the business. If the tax is calculated lower than the actuals, then the business may get a penalty during the audits. GST has made the calculation easy, and it has helped businesses to be more compliant with taxes.
- Lower Taxes – There were taxes on taxes earlier, but with the GST, this has been reduced. Moreover, the exemption limits are great with GST, which helps businesses lower their tax liability. These additional funds can be infused back into the business, and it can help them grow.
- Input Tax Credit – The businesses can now claim the input tax credit. This is yet another advantage of the GST system. GST is a consumption-based tax, and hence more cash can be available at the disposal. This extra cash can either be used for the growth of the business or it can be used as working capital. In both cases, the businesses are happy.
- Corruption – With the GST, things have become more transparent. It is easy to detect fraud and under-invoicing. The businesses are more accountable, and the government is also able to plug in the leakage in the taxes. The mistakes in GST returns are easy to rectify, making it more business-friendly.
- Easy Scalability – Earlier, businesses had to understand the legal framework of different states if they had to expand to new states. With the GST, the framework is simple and easy to understand. A lot of paperwork has been removed, and the businesses now have a single point of registration. The smooth process has made it easy for various businesses to scale their operations in different states.
- Clear Demarcation Between Goods & Services – The distinction between goods and services is now clear; hence, it is easier to file GST taxes. Tax fraud is reduced, and mistakes have also been reduced. The tax slabs are also easy to understand.
This was all about the impact of GST on businesses in India. Overall, GST is a positive and welcoming change for the business, which has helped them scale and grow. With every GST council meeting, new changes come, which makes it more friendly for businesses in India. The new regime is certainly a revolutionary tax system, and the NDA government has done a great deal in implementing the GST structure. There are also many software available at an affordable price which can take care of GST for your business.