Goods and Service Tax or GST, in short, is a boon to businesses. Indian tax system is very complex and has different direct and indirect tax deductions for various products and services. Hence, understanding the tax structure for your small business used to be complicated and very difficult to implement. Now and then, there would be a change in the structure due to volatile components like service tax making the traditional taxation process more intricate.
Imagine an entrepreneur who has just started a business. In addition to the businesses processes, they would also have the additional burden of filing taxes before the deadline, understanding tax credits, and payment procedures entirely to run a compliant business. However, with the traditional taxation structure, there is a lot of scope for mistakes, or rather blunders, which a tax auditor would not agree to look past. This might result in serious legal implications and hamper the business mostly.
GST has simplified the entire taxation process for small businesses and ensures that the structure is easy to understand and implement. There are not many variations in the tax structure for different businesses, which further simplifies the process. So, confused about the things that you need to know? Keep reading.
1. Will my tax burden go down?
GST will have a definite impact on the cascading of tax. That is, the tax will not be levied on a produced well at every stage of its transfer till it reaches the end consumer. This would drastically bring down the tax burden. The input credit can only be demanded in case it matches with the billing statement of the respective suppliers in between.
“Tax will not be levied on a produced well at every stage of its transfer till it reaches the end consumer.”
2. What about my compliance procedures?
GST registration process is aimed at bringing down the burden of compliance on small businesses. However, since the procedure is new and contrasting to what has been followed for these many years, you would require a more stringent compliance procedure to ensure a smooth transition.
3. Will it become more tedious?
It is worth noting that the traditional taxation procedures required you to file for VAT, service tax and all other returns separately, as the input mechanism are different for each tax. However, in GST, you only need to input your purchase and sale details, the GSTN would automatically match invoices for claiming input credits, and the returns and prepared accordingly. Once this process is completed, there is no further requirement to file anything else on a monthly basis.
4. Knowing all the GST rate slabs
At present, there are four proposed tax slabs that you need to know which ranges from 0% to 28%. The first one is the special categories of goods and services which would include all the luxury goods like precious metals and falls in the 28% tax slab. The second category is that of standard goods and services which have a 12%-18% tax slab. The third category is that of goods of mass consumption like oil, tea, and spices with a tax rate of 5%. Grains like rice and wheat, and other essential products and goods are exempted from tax, and there is a proposed cess charge on sin products like cigarettes, aerated drinks, luxury cars, and tobacco which is over and above the 28% levied on standard goods.
5. How do I pay
Once you do the GST registration online you can start filing the returns through GSTN and the tax is calculated based on your liability through sales bills. The valid tax input credits also get adjusted automatically. The amount can then be paid online.
6. How will this system impact my working capital?
One of the points to be kept in mind here is that, while there is no cascading of tax, the working capital requirement would increase significantly in case your supplier or customer is non-compliant with regards to tax filings.
7. GST returns
This is to be prepared based on your invoices for the stipulated period of return filing. You have to upload the relevant bills, sales register, and other relevant information which would be required to authenticate your returns.
8. Matching credit inputs
You have a period of two months to match your credit inputs post which you will have to revoke all unmatched credits. You can work with your vendors and suppliers for any return which doesn’t get matched after which the final tax return would be prepared and tax liability would get discharged.
9. What should I know about GST compliance?
Ensuring GST compliance is an essential thing after online GST registration. The best way to start is to ensure that all your transactions are recorded in the system and is reportable. One of the inevitable GST registration requirements for small businesses would be to have a technology-aided solution to enable them to be compliant. Such a system can effectively capture and record all the transactions and minimize any loss of records or invoices.
10. What is the most important thing I need to know about GST?
You need to be wary about two types of invoice namely the tax invoice and bill of supply to ensure GST compliance. You can issue an invoice for goods any time before the delivery of the product and for service, you can do so within 30 days of supply of the service. In the case of non-taxable supplies, you are not required to issue a separate bill of supply if you have already issued a VAT invoice. Also, issuing invoices is not essential for a small tax-payer who does a large number of transactions below 200 unless specifically requested by the customer.
Online GST registration has become compulsory for every business person in India with an annual supply turnover of over 25lakhs. This is inclusive of all kinds of legal entities like proprietorship, LLP, partnership, company, society and any other related profit making body. The registration has to be completed within a month of exceeding the annual supply turnover limit. The entire GST registration process is seamless, transparent, straightforward, and is an absolute necessity for all businesses.
“The entire GST registration process is seamless, transparent, straightforward, and is an absolute necessity for all businesses.”
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