India’s Goods and Services Tax rolled out in July, 2017 with a great deal of fanfare. Although there have been some technical glitches and bumps along the way, the GST regime has some exciting benefits for small businesses.
When you take full advantage of the GST’s perks, you can save time, boost your customer base, and change your business for the better.
For small business owners, one of the best parts of the GST is its convenience. In the old system, your company had to pay and track a variety of taxes, including service tax, central excise duty, purchase tax, luxury tax, and countervailing duty.
With GST, you only need to pay a single tax, making your monthly and annual returns much easier. That means you can stay compliant without spending money on a tax professional.
Even better, you can use the online GST portal to handle every step of the tax process, from registering for a GSTIN to paying your monthly tax bill, so you never need to worry about saving paper copies of your returns. If you ever need to reference a past return, just log in to the GST portal and pull up a copy.
Reduced Trade Barriers
One of the most exciting benefits of GST is the reduced trade barriers between states in India. Before GST, selling to customers in other states was difficult, thanks to the complicated state, interstate, and national taxes involved.
To make matters worse, each state had different rules. For small companies, this extra burden was often impossible to bear, resulting in a limited customer base.
Because GST eliminates all the varied state taxes, it opens up the whole of India to your business. With GST, you can ship products anywhere in the country and still pay the same tax rate.
Better Tax Credits
One of the biggest problems with India’s old tax regime was cascading taxes. Because of the many different levies, you were often forced to pay tax on tax.
To reduce this problem, GST created the input tax credit (ITC), which extends seamlessly through your supply chain.
The concept is simple — you buy supplies for your company from different vendors, and you pay GST when required. Then, when you sell your products or services, you charge GST to your customers. Each month, the government expects you to pay that amount in taxes.
That’s where the ITC enters the equation. With this credit, you can subtract the GST you paid to your vendors from the amount you owe to the government. That lowers your tax bill, allows you to reduce your prices, and ensures that you only pay GST on the value your company added.
Before GST, shipping your products between states was often a hassle. Tax checkpoints at the borders often forced truckers to wait in line for hours to pay interstate taxes and other state and local taxes.
This process drove up prices for fuel and created an extremely inefficient shipping system.
The GST regime aims to solve these problems. Because the tax gets rid of the various national and state taxes, your drivers don’t need to stop to pay tax. As part of GST, the government is eliminating border checkpoints, which saves time and fuel and helps your products arrive on time.
For small business owners, the GST system is relatively easy to master. Once you get the hang of the new forms and filing requirements, you can streamline your accounting workflow to save time and money.