Although it took six long decades to introduce a uniform tax system spanning the entire length and breadth of the country, India is finally set to enter GST regime from 1st July 2017.  

Dawn of a unified market for MSMEs

GST streamlines movement of goods and helps businesses transact their operations without any interstate hurdles and frees them from complexities of a multitude of taxes.

Being a developing nation, India boasts of a huge array of small and medium enterprises that have to grapple with a myriad of complex tax procedures while doing business across different states and also within the states.

India is progressing to emerge as a developed nation and GST is a giant step in this direction since it will facilitate MSMEs by doing away with three principal taxes including VAT, service tax, and excise.

Under GST system all taxes will be integrated into a single tax, thereby reducing the burden of managing variety of taxes. It will also reduce the overall tax burden to offer a significant relief to small and medium sector.

Small businesses set to benefit the most

There are many provisions in the new Goods and Services tax system that will encourage new businesses in addition to small and medium companies. In the following discussion we will discuss some of the compelling features of this new tax reform that favor growing businesses.

You can easily start your new business, thanks to the streamlining of centralized registration process. This is backed by a simplified regulatory mechanism that is aimed at attracting overseas investors from global markets in addition to helping modern e-commerce industry.

Payment of taxes will be simplified in the new GST regime as all state and central taxes are poised to be merged together. If you are a new businessman, then the exemption slab of Rs 20 Lac will be raised by additional Rs 5 Lac for reducing overall burden of tax payments on startups.

GST system does not treat services and sales differently, hence the tax calculation will be computed on overall business. It is found that the earlier tax system did not allow availing of set offs on all taxes, but the GST will facilitate businessmen to get set-off benefits on the entire portion of taxes. The input tax credit will be available for al taxes.

The most significant aspect of GST is the economic unification of the country which is divided in multiple states with every single state having its own set of taxes.

Tax liability will only be generated in GST system after the services or goods have reached end user since this is essentially a destination based system of tax computing.

Seamless compliance

Indian businesses in general and MSME sector in particular have been facing variety of complexities due to multiple taxes levied by states and central government. GST system will effectively curb incidences of tax evasion by bringing each and every component in the trade link under its gambit.

The provision of threshold set for small units that belong to under Rs 20 Lac category is going to broaden tax net. Invoicing of sales and services will have to be strictly in compliance with GST.