When there is a change in certain laws or practices, it impacts and everything to some extent. Previously there were several tax practices, and the businesses had to follow them all. Though after GST came, other taxes were levied, and there is only one tax. Still, the impact of GST on small and medium enterprises was difficult to cope with the sudden change.
GST for small business was introduced with the expectation of revolutionizing the tax system of India. But one also needs to know how the small and medium-sized enterprises got impacted by the new taxation law.
HOW WAS THE IMPACT OF GST ON SMALL AND MEDIUM ENTERPRISES DIRECTLY?
GST regime has made the process of starting and running a business accessible in India. Earlier every new business needed to have a VAT registration soon after they register their business. The VAT also varies in different states of India. Thus, the process is equally confusing for business owners. Once GST was introduced, the business owners need to register for only one tax, and that is the Goods and Services tax and nothing else.
The process of GST filling and registration is even easier. All the steps, payments, filling, returns, and everything related and needed regarding the Goods and Services tax, are done online. The tax registration is easy to handle by the businesses and the startups who started their businesses after the implementation of GST, are free from the extra burden of several tax registration.
Most of the businesses who are making an annual turnover of 5 lacs in some states, and 10 lacs in other states, needed to make VAT payments. The difference in various states also creates a scenario of confusion. As an impact of GST on small and medium enterprise, the businesses that have a turnover of 5lacs to 10 lacs annually, don’t need to pay or register for GST returns. They can simply avoid applying for the GST return.
GST allows the small and medium-sized enterprises to do business without much burden and being stress-free and also be free from unnecessary and time taking activities. The compliances have become more comfortable after the GST certification course by MSME was introduced with the taxation law, and now there is less complexity.
HOW GST WAS HELPFUL FOR SMALL AND MEDIUM ENTERPRISES?
There was an impact of GST on small and medium enterprises as it meant to bring all the existing indirect taxes under one roof. To run various departments under one bsi9ness, the small and medium-sized enterprises had to take care of different taxes previously. The taxes were filled in a different part of the time of the year. Some of the taxes needed to get paid annually, some needed to get paid half-yearly, etc. It is undeniable that the more there are departments in a business, there are more harassments of paying all those taxes.
Also, there is a decrease in the percentage of tax the businesses used to pay earlier. Where the small and medium-sized enterprises paid a tax of 32% before Goods and Services Tax, now they need to pay not more than 18 to 22 %. Also, now there is no need for paying different taxes for various departments. It’s only one tax to get paid and which is easier for the business owners.
TAKEAWAY: In this article, we talked about the ethical impact of GST on small and medium enterprises. Which doesn’t mean that GST doesn’t have any negative effect on them. The business owners who operate in pan India, need to register for GST in every state where they are present with their business or making a sale.
Also, the returns of GST required to get paid every month, which is an added responsibility for all. But the potential negative impacts of GST on the small and medium enterprises can be minimized and can have the benefits of positive effects in the long term.