How GST Benefits Small Business Owners

Small Business Owners

GST had been a long-awaited reform in India, which has made its essential services more accessible to the masses. The regime’s implementation was initiated on 1st July 2017, to further simplify the country’s indirect tax structure. However, the benefits of GST registration for small businesses and start-ups are often unclear. This may be because of a lack of understanding of different aspects of GST like rule 37 of cgst/sgst rules, compensations scheme etc. To shed light on GST registration benefits for SMEs and start-ups, we have compiled a list of top 5 advantages.

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  • Simplified Taxation Structure

 The introduction of GST has simplified the taxation process for small businesses and start-ups. Earlier, there were multiple taxes like excise duty, VAT, service tax, entry tax and octroi that had to be paid. Now, GST has brought all these taxes under a single category.

  • Lesser Tax Burden

 With the introduction of GST in 2017, SMEs and start-ups have been able to save a significant amount of tax.

  • Lesser Rate of Taxation

 This is one of the most outstanding advantages of GST. The rate of taxation on goods and services has decreased significantly after the implementation of the GST regime. This has been made possible by the absence of cascading taxes made possible by GST. Cascading taxes are taxes on taxes. When a business purchases raw materials or services from another vendor, it will be charged a value-added tax (VAT). If this business then passes on that cost to its customers, it will also have to pay a service tax or excise duty on top of that. Under GST, there is no cascading of taxes as each entity in the supply chain pays only its own share of taxation. The entire process is far more transparent than before.

  • Online Accessibility

Businesses that have registered under GST can enjoy the benefits of filing returns online through the official website of the Goods and Services Tax Network (GSTN).

  • Easy Transferability

The business entities that have secured their place under the GST regime can easily transfer their credit from one head to another without any restrictions.

  • Easy Availment of Input Credit:

Small businesses and start-ups are able to avail of input credit on all purchases without any restrictions or conditions. This way, they can save on their input costs and increase their profit margin.

  • Improves business credibility: 

Last but not least, it must be noted that the GST registration gives your business a sense of credibility. As an SME or start-up, your main aim should be to grow and expand your business. However, if your business is not registered under GST, then it may not be possible for you to carry out your business operations as smoothly as they should be. This is because when you are doing business with another company that is registered under GST, they would expect an invoice with appropriate GST charges to be issued by you. If you fail to do so, they won’t do any further business with you. So if you want to keep up with your competitors and continue receiving orders from bigger companies or corporations, registering under GST is a must for your business.

  • Fewer compliances mean better compliance

Earlier, excise duty, VAT, CST and service tax had to be paid separately on various items produced or sold by an enterprise. This led to a number of cases where both double taxations, as well as no taxation at all, occurred on the same business transaction. With GST imported as well as domestic goods will have integrated taxes applicable on them – IGST (Integrated GST) which will replace CST (Central Sales Tax), SGST (State GST)