How GST Registration Can Save You Money

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GST is an indirect tax imposed on the supply of goods and services within India. Indirect taxes like excise duty, service tax, VAT (Value Added Tax), CST (Central Sales Tax) and attribution were consolidated into one unified pan-Indian market. GST was a revolutionary step towards achieving ‘One Nation, One Tax’.

GST Council is a constitutional body comprised of state and central government representatives that decides on GST rates, exemptions, and anything else related. We take all our decisions after a lot of deliberation and consultation.

How GST Will Affect Businesses

Goods and Services Tax (GST) has impacted businesses across various sectors in India. While it’s simplified the tax structure and reduced the overall tax burden, it’s also caused some challenges. Here’s how GST has impacted businesses in positive as well as negative:

Positive impacts

• The GST consolidated multiple indirect taxes into one tax, making businesses’ compliance easier.
• Businesses can get credit for taxes paid on inputs, reducing their taxes.
• The GST reduced interstate trade barriers, making it easier for companies to operate across states.
• GST has improved transparency, making it easier for businesses to understand their tax obligations.
• Manufacturing gets a boost from GST. Raw materials and components cost less because of GST.
• GST increased competition among businesses, lowering prices for consumers.

Negative impacts:

• Businesses had to adapt to new processes and systems when GST was implemented.
• GST has affected businesses’ cash flow in some cases because of delays in claiming input tax credits.
• GST has generally resulted in lower prices, but there have been some instances where prices went up.
• Businesses now have to keep more detailed records and comply with more regulations.

Benefits of GST Registration

Input Tax Credit (ITC)

Input Tax Credit (ITC): One of the biggest benefits under GST is Input tax credit. The GST paid at the time of purchase (inputs) can be set off against that is collected on sales made by businesses as output taxes. This ensures the cascading of taxes is removed, because under this mechanism tax on a good/ service is levied only at point of sale unlike now when they are collected from manufacturer to distributor or retailer then finally consumer. This way, businesses can offset their overall tax liability and obviously improve the liquidity position.

Simplified Compliance

The tax compliance process is simplified for businesses with the help of GST, and under it numerous other tax returns are replaced with a single unitary return. The paperwork and procedural complexities are largely reduced, which in turn saves a great amount of time and resources for the businesses. Also, the online GST portal is an easy to use interface for uploading returns or creating invoices & managing tax matters.

Expansion of Tax Base

Under the new system, GST has widened its tax net to many goods and services so that more people can be brought under the formal economy. This has resulted in higher tax revenues, part of which can be used to build infrastructure and social programs. As a result, you will also make the tax burden fairer spread with a broader tax base.

Boost to Exports

It is great that GST overall has made commodities at an affordable rate and thus the aspiring quality around this revolution in certain circles hails it as one of our strong aspects where we exports now are more competitive because our product cost includes only export inputs without cascading effect on taxes. This has also given exporters lever to reduce prices in the global market thus reducing trade deficit.

Benefits for Consumers

The first and the foremost reason why GST was introduced is because it makes things easy for businesses, but this tax regime has certainly helped consumers too. This has resulted in the price reduction of many goods and services due to removal of cascading taxes. Another positive consequence of the GST regime is that it provides transparency in taxation which enables consumers to know exactly how much tax they are paying on a product.

Business Hurdles

Although many benefits are realised, the businesses had to face some problems while transitioning into the GST regime.

Technology Adoption

For more efficient use of GST, a strong technology backbone is necessary. A large number of small and medium-scale enterprises (SMEs) found in trouble to install the required software and hardware as per GST rule.

Working Capital Issues

Going from a prepaid (or postpaid at the end of each quarter) system for tax payments to GST in which payment was due on dispatching goods changed the working capital needs of businesses. Unmatched input tax credit with output tax liability leads to cash flow problems.

Complexity of the GST Law

The GST law is a very big and complex one having too much provision, rules etc. Evading these provisions is complicated and can be a full-time job in itself. You can get legal advice from top lawyers online at VakilSearch.

Dual Control

Also, the regime of dual control i.e., both central and state tax authorities have power to administrate GST has further multiplied the compliance burden on business houses. It can be more difficult coordinating between the two authorities.

Eligibility & Process For GST Registration <h2>

All businesses must register under GST to enjoy the benefits of financial subsidies and are required by law. Eligibility of GST registration

Compulsory registration- Those business enterprises whose aggregate turnover is more than the limit (presently Rs. 40 lakh for most of states and Union territories) have to mandatorily register under GST;

GST registration: If a business has turnover below the threshold, then it can opt for GST Registration on an optional basis if they wish to claim input tax credit or supply interstate.

Steps to GST Registration

• Registration: Application for registration at GST portal.
• Attestation: The information given by the claimant is checked by the tax authorities.
• The Business is issued an online unique Goods and Services Tax Identification Number (GSTIN) also part of the GST Registration process.

How to Save Your Money with GST Registration

• Input Tax Credit (ITC): Claiming ITC as discussed above can greatly reduce the ultimate tax liability.
• Lower Compliance Costs: GST registration can save businesses on administrative expenses, as it simplifies the tax compliance process.
• It Will Improve Cash Flow: With Better ITC Utilisation & Low Compliance Burden cash requirement to carry on business will considerably fall.
• Composition Scheme: Small businesses are not required to pay GST for this scheme, having lower tax rates and a simple regime.

Conclusion

The GST- a game changer in the regime of indirect taxes arising out of India. Although businesses may meet some challenges in the beginning, the rest are big benefits. Understanding the nuances of GST and adhering to its rules helps businesses in managing their tax liability, easing cash flows, increasing competitive nature.

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Disclaimer: This article is intended for informational purposes only and contains sponsored content. The information provided herein reflects general insights into GST registration and its potential benefits for businesses. TaxGuru does not endorse any specific services, products, or platforms mentioned in this article. Readers are advised to conduct their own research or seek professional advice before making decisions based on the content provided. While the article discusses the advantages of GST registration, including potential cost savings, individual business circumstances may vary, and the benefits mentioned may not apply universally. Tax laws and regulations are subject to change, and compliance with the latest legal requirements is essential. The use of third-party platforms or services is at the reader’s discretion and risk. TaxGuru does not take responsibility for any outcomes resulting from the application of the information in this article. Always consult a qualified tax professional for personalized advice tailored to your specific business needs.