Goods and Services Tax (GST) is presently the most debated issue, not only in the formal economy and players within those contours but also among small businesses (owners of mom and pop shops), as the new taxation regime will not spare these until now unseen enterprises that in fact played a bigger role in driving the economy of the country.
To begin with, let’s agree that GST compliance is a bit complicated, not for the number of returns that are to be filed by businesses but for the manner in which filings are to be done. For small businesses, electronic filing of returns and uploading of invoices can be a herculean task as many of these lack computer skills, plus reliable internet connectivity in Tier-2 and Tier-3 cities, let alone rural markets, is still a huge challenge.
Under GST, while those with the annual turnover of less than INR 20 lakh have been exempted from the regime, those with turnover up to INR 75 lakh can opt for composite levy where returns are to be filed quarterly (here, however, input tax credit cannot be availed).
But can small businesses keep themselves out of the new system that is well poised to make transactions more transparent, more formal? The entire GST is based on the premise that tax paid by the previous supplier should be availed as credit by the present party, hence avoiding any cascading of levies.
Do you then think that any corporate buyer will go for their supplies from an unregistered firm or from one that has paid its share of GST which cannot be availed by the buyer as credit? This indicates that sooner or later the country is set for a change, from being an informal sector dominated economy to an organized market where the entire supply chain is both visible as well as accountable for its share of tax liability.
Now does this mean that small vendors are eying an end to their role in the market?
MSMEs have been the backbone of the Indian economy; they add substantially to country’s GDP, employment, and export. Hence they cannot be written off so easily. However, only those businesses that will ride the current wave and get themselves within the contours of the new tax regime can emerge out as winners.
All this is an indicative of country’s imminent and decisive shift to being a more formalized economy, thus not only will the businesses benefit in the long-run, but also employees who can now hope for employment benefits like provident fund, gratuity, insurance and bonus, which hitherto were available only to those employed in the formal sector.
It is learned that the department is making filing easier by asking for details only on turnover, tax liability and GST paid in return. For small businesses, it is time to embrace the new tax regime, complicated only by its fact but not otherwise, then find ways for avoidances.
Also Read: Pros and Cons of GST – Impact on common man
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