GST is the biggest revolution till date and changed the Indian economy for betterment. It has affected many sectors; one such is SME (Small and Medium Enterprises). This field is contributing its part in India’s GDP. Though there are some who still think that the implications can slow down the business. That is why SME is introduced.
Eligibility of SMEs for GST
If we talk about the Indian economy, SMEs are the one who contributes around 7% of manufacturing GDP and 31% of services GDP. The growth rate remains consistent for 10%. According to the GST, all those businesses and SMEs need to register under GST if they fall under the required category of turnover. For example, except North East India, rests who have a turnover of 19 lakhs are liable to pay Rs. 20 Lakh.
What is the need of SMEs to enroll?
The SMEs who are registered under GST considered as a legal provider of services and goods. Due to this, the tax accounting can easily be streamlined. Thereof, SMEs can maintain the accounts of taxes paid very easily. This is return results in better cash flow. GST, thus open the gate of opportunity to modernize the business and set up the standard to do business in future easily. The footprints left by digital transactions are used for assessing the sector and do the work with more accuracy.
Discussing the impact of GST on SMEs
There are many pros related to the introduction of GST in SMEs. Some of them are mentioned as:
- Smoothly starting a business
As per the GST rule, if you are opening any business then it is required to register in your state instead of getting VAT registration.
- Increase the ability to compete with multinationals companies
GST is considered as a destination based taxation system. In general, SMEs are not able to transfer the ‘stock transfer’. But, under GST this can easily be applicable and help SMEs to deal with multinational companies.
- Encouraging transparent transactions
With the GST, SMEs are able to do an online tax obligation and decrease down the liaison with tax authorities even when offline.
- Decrease down the tax burden
Those with a turnover of Rs 5 lakhs (Rs 10 lakhs in North East India) needed to register under VAT as per the previous regime. Now, the scenario has changed. If you are doing the business over Rs 20 lakhs, then you have to register under GST.
- Improve the cash flow
Cash flows can easily be increased because of input tax credit. SMEs can easily adjust the tax paid on input.
The concerns about GST
- Go digital
GST requires SMEs to adopt the technology. For this, you can consult experts to go for a makeover.
- Enhance profitability with higher tax rates
After the introduction of GST, the tax rate has increased from 15% to 18%. This clearly indicates higher profitability.
- Strict compliance norms
GST brings stringent compliance and people practice a uniform tax regime.
GST is ready to usher the taxation sector and SMEs have to decide the right investments in order to bring benefits