After much deliberation and debate, the introduction of GST has materialised a significant reform in India's indirect tax structure post-independence. It has merged most indirect taxes like VAT, services tax, CST, entertainment tax etc. and formed a single-window system.
The implementation of a uniform structure has had an impact on the small and medium businesses in India. However, before understanding the GST impact, let's learn about it first.
What is GST?
It is a consumption tax applicable on various stages of manufacturing and distribution of goods and services. It combines multiple indirect taxes, namely VAT, state and local taxes, surcharges, entertainment tax, etc.
Furthermore, the impact of GST on businesses across the country includes –
The application of GST has increased the threshold for taxes. Earlier it was set at Rs.5 lakh, and now it is Rs.20 lakh.
Companies can now refrain from paying VAT and services tax separately for goods and services and just pay GST for all transactions.
GST services have consolidated the tax structure and brought in fully online registration and return filing system, which has increased convenience.
Unlike the preceding taxation system in the new one, companies can offset their tax payment on purchases from their final tax payment on revenue and decide the ultimate GST figure.
After incorporating almost all the indirect taxes, companies are no longer required to pay state-specific taxes, which has improved the logistical part of a business.
All types of GST have played a crucial role in improving the ease of conducting business in this country. Also, with tax papers in order, companies can easily secure business loans from leading financial institutions.