How self employed professionals, entrepreneurs, SMEs can get ready for GST
Most businesses not ready for GST
31% need more time
38% completely ready
15% client not prepared
17% Somewhat prepared
Is the industry ready for transition to GST ?
Yes, transition should be smooth: 31%
Transition will happen with difficulty: 37%
Industry not ready, transition might be chaotic: 31%
“The GST is not just a tax reform or even a business reform. It is a lifestyle reform that will change the way business is conducted in the country,” A chartered accountant who advises corporate houses on GST compliance and related issues. “Nearly 50% of Indian businesses are not aware of the changes that GST will usher in. Most of them think it is just another tax regime,”
The level of unpreparedness is even greater among small businesses and tiny outfits. Many small entrepreneurs feel they can bypass the GST if their turnover is less than Rs 20 lakh. That is true, but this exemption comes with its own set of problems. “If you are not in GST, the businesses you supply to will have to bear the burden of your compliance. They may eventually switch to vendors who are registered under GST,” even if you are a small business with a turnover of less than the GST threshold of Rs 20 lakh, get yourself registered.
It may come as a surprise, but joining the GST is not the Rocket Science that some entrepreneurs and small businessmen presume it to be. One can register online by logging on to gst.gov.in. Some companies, such as tax filing portal charge a small fee for assisting companies and small businesses to get on board . “We offer a bouquet of services, including cloudbased GST software, an endtoend platform for filing GST returns and GST compliant billing supported by integrated learning modules. This single software can be used to do full GST compliance,”
A leading name in tax and corporate law and a GST Suvidha Provider, has also introduced One Solution, an integrated software that does all the GSTrelated compliances. Though the rates vary depending on the size of the organisation, they start as low as 99 paise per invoice.
Also Read : –How your business needs to change for GST ?
Other smaller outfits are also doing their bit to spread awareness about GST and get businesses to register. Delhibased chartered accountant Aditya Agarwal has set up GSTsamadhan.in. His team not only helps in the registration formalities but also conducts training workshops for companies. In the past six months, Aditya has conducted training sessions for nearly 25 corporate clients, with charges varying according to the size and complexity of a company’s account books.
Opting for composition scheme
GST will require a very high level of compliance. Out go the handwritten ledgers, accounting books and notepads. Everything will be online and will need to be updated regularly. A business will have to file 37 returns in a year (three returns per month and one annual return) per state. If it does business from offices in more than one state, the number of returns will go up accordingly. A business with a offices in three states will have to file 111 tax returns in a year.
The GST provides some relief for smaller outfits that may not be able to meet these stiff requirements. An enterprise with a turnover of less than Rs 50 lakh can opt for the composition scheme, which levies a presumptive tax of 0.52.5% on the turnover. However, this option is not open to everybody. Only manufacturers and specific service providers (restaurants) can opt for this composition scheme.
But though the composition scheme requires lesser GST compliance, it has several drawbacks. For one, only businesses which operate within a particular state can opt for this. Plus, opting for composition breaks the chain of seamless input tax credit. “Those who buy from a composition dealer will not be able to take credit of any input tax. A composition dealer cannot levy and collect any tax from its buyers.
Should the composition dealer purchase from registered persons, he will not get input credit on the tax paid by him on inputs,”
In future, the government will also start rating companies and businesses on the basis of how well they have complied with the GST rules. “Right now, not complying with sales tax or excise rules means a penalty and interest. It can be prosecution in extreme cases. But under GST, the Compliance Rating Score (CRS) could mean that a poor score leads to loss of business,” .
This is what many tax professionals are worried about. They fear the compliance score will be used to assess the credibility of a business. This could wipe out small businesses that face cashflow problems and delay payments. Since their problems will now be public knowledge, buyers will avoid this company leading to further payment delays. “This will slowly, but with certainty, drive almost every small business to eventual closure,” contends Goenka (see column)
Will postponement help?
As the GST deadline approaches, many in the industry and in tax circles are hoping it will be deferred. It is also the
general human tendency to resist change. Instead, we must embrace this change in a positive light,” “Deferring the rollout will not help. The government should stick to the 1 July deadline,”
There are likely to be teething troubles when such a massive change is introduced, but over time these problems will get ironed out. “The level of compliance is very high under GST. We hope the government is lenient towards compliance lapses so that businesses get used to the requirements under the new law,”
Till last year, her financial research outfit was only exporting services but was exempt from service tax. From this year, the company has started sales in India as well. She applied for registration under GST when the window opened on 1 June.
“GST will be a push for the unorganised sector to become mainstream. See it as a club which offers its members certain benefits such as input tax credit and access to a large number of buyers and sellers, which can impact business positively,”
GST registrations opened last week and will continue till 15 June. If you have a small business or shop, it will be beneficial to get your company registered under GST. We wish your business good luck and prosperity.