Introduction

The implementation of GST in India in July 2017 has impacted small businesses in various ways. While it has reduced logistics costs, paperwork, and tax burden, it has also led to some difficulties and hassle affecting the startup ecosystem. In this article, we will discuss the pros and cons of GST on small business owners.

Benefits of GST for Small Businesses

One of the significant benefits of GST for small businesses is the reduced logistics cost. The two taxes levied during the interstate transportation of goods were CST and Octroi, which have been replaced by GST. This strategic move has led to the reduction of transportation costs and delivery time, making a great impact on startups.

Another positive impact of GST on small businesses is the reduction of tax burden. Previously, businesses with annual turnovers of less than 5 lakhs did not have to pay VAT registration, but the limit has been increased to 20 lakhs, giving huge relief to small startups.

GST has also made business management more comfortable for small businesses. Before GST, businesses had to register with various tax authorities, which led to the maintenance of a number of documents and required different tax returns to be filed under different authorities. However, with the introduction of GST, there is less paperwork, and businesses are able to run smoothly.

Furthermore, GST has made business expansion easier for small businesses. As most businesses are now restricting their business operation to one authority, compliance becomes easier, and inter-state tax complications are reduced along with a reduction in transport and shipping costs.

Challenges and Drawbacks of GST for Small Businesses

However, along with the positive impact of GST, there have also been some negative implications of the process. One of them is the decline of freelancers as they are generally exempted from the 20 lakhs tax limit and are required to register themselves as a casual taxable person under GST. Even those who do not fall under a fixed business category have to register under GST.

Another negative impact is the overburden of tax on startups. Under GST, it has become mandatory to upload invoices and make an e-way bill on the stipulated time. Startups have to keep the track of time on a regular basis and comply with it, which significantly reduces their innovation capabilities.

Moreover, small startups are facing difficulty as turnovers of fewer than 1.5 crores were exempted from GST returns in the pre-GST era. However, after the implementation of GST, it has become mandatory for all startups to register for GST even at a turnover as low as 20 lakhs, which has increased the compliance burden on small businesses.

In addition, technical difficulties related to the registration process have also emerged as a significant challenge for small businesses. As all the registration processes take place online, many sellers find it challenging to understand and follow the process, and it becomes difficult for them to comply with the GST regulations.

To overcome the challenging impacts of GST, various companies have been helping startups to manage their GST filing and help in the registration process. One such company is Dhanaay, which has been successfully assisting multiple startups with their financial part and helping them to flourish. With their monthly and quarterly plans, they have been offering various services to help startups comply with GST regulations, such as GST registration, GST return filing, and GST advisory services.

Conclusion

In conclusion, the implementation of GST has brought a significant change in the tax structure of India. While it has brought about positive impacts such as reduced logistics costs, comfortable business management, and business expansion, there have also been some negative implications for small startups such as decline in the number of freelancers, overburden of tax compliance, and technical difficulties related to registration. Nonetheless, companies like Dhanaay have been helping startups to overcome these challenges by offering various services related to GST compliance.