What is GST (Goods and Services tax)?
Feb 19 2013, 18:32 | By SME Mentor
An important tax related reform for SMEs expected in the coming years is the Goods and Services Tax (GST). As entrepreneurship in India becomes more organised and businesses grow in scale of operation, tax structures will have to change to keep pace with these developments. GST is a step in exactly this direction. Moreover, it is becoming a world standard with 140 countries already using it in some form or the other. With its introduction, the GST can benefit SMEs and large corporates by simplifying procedures, thus saving time and improving productivity as a result as well as making SMEs more cost effective.
What is GST?
The GST is expected to replace all the indirect taxes in India, which is important for SMEs who pay indirect taxes as buyers of goods and services, and file returns on them as sellers. At the centre's level, introduction of the GST will mean that it takes the place of central excise duty, service tax and additional customs duties. At the state level, the GST will take the place of State VAT. The State level GST is likely to have a floor and be in a small range across the states.
What are the advantages of GST for SMEs?
SMEs and large corporates can expect a number of benefits with the introduction of GST, like simplified payment of taxes and filing of tax returns, for one. Common registration for both is expected at the central level. In fact, an e-payment mechanism is expected to be introduced adding to convenience in tax payments. Also, SMEs with turnover under will be uniformity in rules for input tax credits and sales VAT at the central and state level. Overtime, the GST is expected to create a more business friendly environment for SMEs, since price levels and hence inflation can come off overtime as a uniform tax rate is applied. Also, the government's fiscal health is likely to improve overtime as the tax collection system becomes more transparent, making tax evasion difficult.
Where is India on GST implementation at present?
A number of delays have taken place in building consensus on the details of GST, including objections raised by State governments, and as per latest reports it will be implemented only by 2015. Nevertheless, steps towards the GST have been taken, which could start impacting SMEs in smaller ways much sooner. A draft legislation is under process, as is the setting up of a website for filing of return and payments for all states. The Permanent Account Number (PAN) card is expected to be the common link in filing both direct and indirect taxes.
What is expected on GST in Budget 2013-14?
The upcoming budget could continue the process of bringing together excise duties and service taxes by creating a common registration for tax payment and filing returns. Thus SMEs could watch out for announcements on procedural changes, which could impact on the mechanism through which taxes are paid or returns filed.
You can send your feedback to email@example.com or simply post comments below
Post Your Comment
Recent Comments (1)
Mar 07 2014, 13:09
Mar 07 2014, 13:09
Mar 05 2014, 10:43