As per reports from Hindustan Times, the collection of Goods and Services Tax during last year April was around 14%, which is Rs.1.41 lakh crore.
Initially, there were massive protests among small businessmen and traders regarding GST across the country. Nonetheless, the introduction of GST has led to an increase in compliance requirements, bringing untaxed entities into the taxation system. Since the Indian Government mandated tax payment, individuals must proceed with GST registration online.
Importance Of GST Registration Online For Small Businesses
The stable growth in GST revenues in the last few months indicated an uninterrupted economic recovery during this period. In reference to this, the overall contribution of the SME sector in India is around 40% of the exports and 70% of total employment generation.
Here are some of the necessary takeaways from the standpoint of small businesses:
Single Online Registration
Initially, businesses had to register under multiple taxes separately. For example, they had to register for VAT, service tax, sales tax etc. However, with the implementation of GST, all these indirect taxes can be subsumed into one unified taxation system. Although this GST registration online varies across states, the process remains the same and can be conducted with authentication and e-verification.
By knowing how to register for GST online, individuals can avoid the hassle of extensive paperwork, and all the uploads can be done digitally. However, if the individual is an existing taxpayer, he/she will be automatically transferred to the new system with nominal hassles and procedures.
Increased Threshold For Small Businesses
To alleviate the burden of compliance on small businesses, the GST Council has specified a limit of GST registration which is an annual turnover of Rs.40 lakh. Businesses not crossing the threshold limit’s turnover do not need GST registration.
However, this rule will vary for certain exceptions. Firstly, if the supply of goods is held inter-state, then GST registration is essential, regardless of the turnover value. Moreover, this limit is applicable to manufacturing goods and services. Hence, it shows a sign of relief to small traders and businesses.
The Benefit Of A Composite Scheme
Along with the threshold of Rs.40 lakh for GST registration online, GST Council has also extended an additional advantage for small businesses under the composite scheme. As per this scheme, businesses with an annual turnover of less than Rs.1.5 crore can choose this scheme, where they can pay a flat tax within the range of 1-5%. The Council has specified selected businesses where this scheme is applicable. Moreover, this scheme will not apply to businesses, including inter-state sales. In addition, when availing of the composite scheme, businesses are not entitled to any ITC (Input tax credit) on the input tax.
Benefits Of ITC To Small Businesses
One of the major drawbacks of the previous taxation system was that it had a cascading effect, which means similar was imposed with tax at various production levels, leading to considerable costs and lower pricing levels. This made small businesses uncompetitive in the market. However, the biggest benefit of GST is that it is a value-added tax and levied only on value addition. For example, if your final payable GST is Rs.500 and you have paid Rs.200 on inputs, then you have to pay only Rs.300 as total GST to the Government. Therefore, this significantly reduced the descending effect of tax.
Apart from this, sometimes individuals can make GST on advance payment which means making the payment prior to the scheduled date to the supplier and collecting the payment receipt. Moreover, to avoid default in payment, sometimes suppliers also require advance payment to cover the expense of services and products.
Now that individuals are aware of how has GST impacted the manufacturing sector, they must also face some immediate challenges.
Apart from these, another advantage of getting the business verified under GST and keeping the documents handy is acquiring a business loan without providing any collateral. Borrowers can earn the privilege of obtaining preferred loan amounts from leading financial institutions like Bajaj Finserv based on GST returns along with various other benefits.
Moreover, existing borrowers can also avail of pre-approved offers on a range of financial products such as personal loans, business loans, credit cards etc. These offer significantly minimise the hassle of extensive documentation and expedite the loaning process. Therefore, borrowers can check their pre-approved offers by submitting their names and contact details.
To sum it up, these are the things which small businesses must know about GST registration online and secure their position in the market. This will also improve the chances of substantial credit for their businesses when required, as their operations are certified by a government authority.