The largest tax reform in India, Goods And Service Tax was carried out on the date 1st of July, 2017. The new indirect tax system didn’t come without its own sets of problems. Technical glitches and the initial over taxation didn’t make the taxpayers look upon the new system favourably.
However, for businesses- especially the smaller ones- the GST regime did bring some good news. Startups and small businesses have the option of saving on precious time and giving a boost to their customer base if they make full use of the GST reign.
For anyone who has GST FAQs unanswered and wants to know exactly how the businesses are going to gain from GST registration, we have listed all the advantages below.
1.Convenience Of Filing
GST has smoothened the process of return filing considerably. The old system required a company to pay and keep track of a number of indirect taxes. Central Excise Duty, Luxury tax, VAT, Customs duty- these were all part of it.
For GST, all these taxes have been subsumed under one. A company has to ultimately pay for a single tax, thereby easing the process of monthly and annual return filing. You should be able to file for compliance without relying on a tax professional. You’re saving up on the cost you would have to otherwise spend on the professional.
Additionally, all steps of the tax process can be handled through the online GST portal. Starting from GST registration to getting your GSTIN and paying all tax bills on time, all of it can be done through the internet. The need for keeping a separate paper copy as a proof isn’t necessary anymore.
If there’s a moment you need to check up on past returns for reference, you can do so by simply logging in to the portal and showing the e-copy.
2. Trade Barriers
GST is supposed to facilitate investment on an international level. Even without that though, the trade barriers between states inside India has been reduced due to GST. State, national and interstate tax, when all accounted for, made for a hefty sum that the companies had to bear if they wanted to sell or purchase good from other states.
The worst part would have to be the difference between rules in each state. Some states imposed a greater tax burden on outside businesses that others. It wasn’t possible for small companies to bear the entire burden. They had to learn the rules and regulations of each state and then pay taxes according to it. The result was the companies limiting their customer base.
The Goods And Service Tax got rid of all extra state taxes. The small businesses now have the option of carrying out their business all over India under one single tax rate. Products can be shipped from one state to another and the tax rate still wouldn’t change.
3. Starting A New Business
Before the GST regime, new businesses had to apply for VAT registration through the State’s Sales Tax department. The procedure and fess involving VAT registration varied each state. For businesses that had operations in multiple states, it was hard to both obtain VAT registration and then fill for compliance under the VAT system.
The GST registration takes out the need for VAT registration. It is much closer to service tax registration in terms of how it has been centralised. Businesses no longer need to apply for multiple VAT registration. The single GST registration would be useful all over India.
The procedure for GST registration itself is quite easy. The entire process can be completed through
4. Input Tax Credit
If we had to acknowledge one of the biggest complications of the old tax regime, it would be the cascading tax effect. All the different levies lead to taxes being imposed on tax.
To get rid of this problem, the GST system came up with ITC or Input Tax Credit. It integrated through your supply chain without any bumps on the road
It’s a startlingly simple concept. When buying supplies for your company, you often had to from different vendors. You pay for the GST as and when due. Afterwards, when you sell these products or services, your forward the GST charges to your customer. Every month, you have to pay for the gathered amount as tax.
This is when the ITC comes into effect. The credit allows you to minus out the GST you had to pay to your suppliers from the amount you have to pay to the government. Your tax bills are naturally lowered and you can reduce your overall prices, creating a surge in a new customer. You also only have to pay GST for your company’s contribution. You don’t need to deal with extra charges.
5. The Shipping
We have discussed the issue of trading between states before. The same was the case for shipping products between states. The trucks from the shipping company often had to wait in long lines on hours end at tax checkpoint of states’ border. They had to pay a bunch of interstates, states and local taxes.
As a result, prices of fuel increased. The shipping system itself turned out to be a mess.
Under the GST reign, we got rid of the national and state level taxes. Drivers no longer have to stop at the border and pay for these taxes. Part of the GST initiative from government involves getting rid of border checkpoints. Fuel consumption and time, both are saved. Businesses get their products delivered to them within the deadline.
For small and new business owners, it isn’t that hard to understand the GST system. You might have to spend some little time analysis the forms and filing rules but once you do, the accounting can be streamlined. You will be saving up on a considerable amount of time and money this way.
We hope to see more businesses prosper under the GST reign.