Why should you take a GST Registration for your small scale business? – A layman’s approach.
For a common man, enrolling in GST is cumbersome and pessimistic, unless it is absolutely necessary by law. Businesses try to evade taxation in order to save fragments of costs and bills, but they sometimes overlook the opportunity cost of having registered in the economy.
So before pondering over the question of should you be registering in GST for your business, let’s just get the basics of what GST Law is.
GST Act came into force from July 2017 onwards, with an objective of having “One Nation One Tax”. It subsumed almost all indirect taxes within itself. Previously, consumers had to pay different taxes on different commodities, for example – VAT on purchasing a household item like Hair Oil, or Entertainment Tax on a movie ticket. But with the advent of GST, all indirect taxes got merged into one and now a buyer has to pay a single GST tax – like 12% GST on Butter or 18% GST for a Movie Ticket. There are a few items like Petroleum and alcohol on which GST is not applicable and previous taxes are being continued to be imposed.
According to the GST Act, any entity engaged in business activity in India can take a GST Registration. The Law makes it mandatory for certain entities to obtain registration if their annual turnover crosses a certain threshold, i.e., Rs. 40 Lakhs for businesses dealing in goods and Rs 20 Lakhs for businesses solely dealing in services (threshold is less for some states). The Law also mandates compulsory registration if your business is inter-state, or if you are trying to sell your goods or services on an online platform. Please bear in mind that the law does not mandate registration for the things mentioned above, so the list doesn’t end here. The objective of writing this article is to familiarise a layman with the GST Act in the simplest way possible. You can take GST Registration voluntarily even if your business does not cross the thresholds given in the law.
But the question remains – why should a small-scale entity enroll itself into the Law? How will it be beneficial to the business?
Having a registered business opens up opportunities with corporates, as it is more legitimate and authenticated. Big businesses are less hesitant while engaging with a registered entity, as there is less scope for fraudulent activities.
Small businesses do not have to deal with additional compliances. The returns can be filed quarterly, and an entity can even choose the “composition” scheme under which it only has to pay a percentage of its sales in a given quarter.
A start-up can also apply for loans at low business loan interest rates to acquire funds for exploring new opportunities.
The process of filing returns and tracking business transactions is smoother and hassle-free. Streamlining of accounting workflow becomes possible, resulting in saving time and costs.
Any taxes paid by the business while acquiring raw materials or services can be claimed as Input Tax Credit, which can be used to reduce the tax burden borne by the entity. For example, if ABC is a business entity that buys fabric to make T-shirts and pays tax on buying that fabric, it can use that Tax Credit to reduce its tax, which it collects while selling T-Shirts.
To apply for registration, one needs to keep a few things handy –PAN Card, Aadhar, proof of place of business, photograph, and of course, the clarity of the business. The GST Portal allows for easy registrations of businesses, which they can get in 7 days, given everything is in order.
GST has definitely brought some great changes in taxation and has tried to bring in developments which is beneficial to the economy overall. By making procedures simpler, easier compliances, cutting costs, reducing prices for the consumers, preventing the scope of corruption and fraud, it has truly revolutionized the country’s taxation, whose benefits are there to be reaped. So, if you have a small business, do not hesitate to get your business registration, because it will be beneficial in the long run.
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This article doesn’t coincide with practical world …. compliances are quite high and cumbersome and Nowadays Even getting basic registration is a big Task.
Sorry but I totally disagree with this. Only to get Corporate clients and just to book ITC ,SSB shouldn’t get GSTN