Fact Check

GST: From The SME Point of View

STORY

Unwarranted Rush, Business Standard, June 13, 2017
GST coming soon: Is everyone ready? The Asian Age, June 13, 2017

The editorial in Business Standard argues that there is a strong case for postponing the GST roll-out. The opinion piece in The Asian Age says that SMEs (small and medium-sized enterprises) are a particularly vulnerable lot, given that they are not used to sophisticated taxation systems. For instance, they will need to employ accountants which will add to their costs — something they can ill-afford. The article opines that what is intriguing about GST is while it was meant to simplify the tax system, it now seems to involve more paperwork. As a result, manufacturers with operations in several states will have to file multiple returns every month.

THE PROBLEM

The editorial appears to ignore the considerable amount of time that has been invested in the discussion on the decision to implement GST. The second article raises the issue of increased paperwork and its supposedly adverse impact on SMEs but seems to overlook the positive effects which, too, GST may produce on the SME market.

THE FACTS

  • The recent meeting held to discuss GST was conducted with the intention of evaluating the readiness of GST for implementation nationwide. The call to go ahead was taken in light of available evidence.
  • GST is meant to make it easier to start a business: Uniform GST across states will standardise taxes for businesses with multi-state operations. This will cut down on the number of processes involved and also on extra procedural fees.
  • SME market expansion: Transfer of tax credit, irrespective of the location of buyer and seller, will now allow SMEs to expand their markets beyond their states as well.
  • SMEs ought to also gain from higher exemption limits and easy compliance.
  • Reduction in logistical expenses: SMEs look set to benefit from the elimination of border taxes and toll taxes as this will reduce their extra overheads.
  • No distinction between sales and services: For SMEs that deal in both, this should be a welcome change.

GST has been a dominant topic of discussion for a while now and it is being brought forth as an important reform measure for all businesses, including SMEs. It aims to create a common and seamless market in India where various and complex tax systems across states have so far caused hindrances to both businesses and customers.

The facts above offer an insight into how SMEs may benefit from the implementation of GST. Despite the increase in paperwork vis-à-vis some of the procedures, the uniformity of tax rates and structures as well as the ease of compliance could bring overall gains to SMEs in the long run.

For a detailed analysis of GST, please read our explainer GST: ALL THAT YOU WANT TO KNOW

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