Impact Of Gst On Smes

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GST was launched a few days back, and this very tax reform of India has been a hot topic of discussion among Indians right from the time when the news of GSTs launch news broke out. For sure the section of people appreciating Modis government for their recent achievements (not for everyone) by governments side on GST topic, but one cannot neglect the fact that there is a good section of Indian population who isnt in GSTs support. Well for, sure everything has its pros and cons and so does Goods and Services Tax, but one cannot discard GST just because of its shortcomings. It is important to take the advantages that GST can offer to Indian population in the long run. In this article, we will reflect upon the things SMEs should know about how to use GST to manage their working capital.

Well, one of the sections that are surely disappointed by GST implementation is none other than the Small and Medium Enterprises. One shouldnt forget that SMEs or Small and Medium Enterprises have been one of the primary growth drivers of this very country. They have been supporting Indian economy for decades. As a developing country, it is important to take into account the impact that this tax reform can have on SMEs. Around three million Small and Medium Enterprises of India contributes around 50% of industrial output and 43% of total export of India. Well, you can guess the employment that this sector generates. SMEs are the one that has offered India keep balanced development across all sectors.

Earlier all the SMEs or manufacturers with a turnover of fewer than 1.5 crores werent required to follow the rules of excise duty. However, after GST tax reform manufacturer with 20 lakhs turnover will have to comply with GST and GSTs procedures. Now, let us discuss how will GST impact Small and Medium Enterprises.

Changes brought on by GST on SMEs in India

We will be discussing the positive and negatives of GST in points:

The requirement of online registration of SMEs will ensure minimal interference from the bureaucracy and in addition to that SMEs will get a certificate of registration in no time. However, one should know that most of the SMEs do not have the technical expertise to carry out the required task online and thus they will need outside help which will eventually increase the registration cost.

The need for electronic compliance has positive aspect as it will bring transparency and will also result in the reduction of the compliance cost. Since all the fund reports will be maintained in electronic credit ledger by the tax department, this may lead to liquidity crunch.

Electronic refund process easily fastens the whole process. One can claim for refunds only after filling relevant returns.

After detailed speculations and impact of GST on SMEs, it can be said that the final verdict via the business owners will be of mixed opinions. The acceptance of GST reforms will vary from state to state and has surely opened a debate whether it will be beneficial for the country and how it will affect the economic growth of India. There are obvious benefits of GST which till now supports the decision of bringing this tax reform to life.