The Goods and Services Tax (GST) is a new tax system in India introduced in July 2017, unifying more than a dozen different taxes into one. The GST levies the supply of goods and services at every stage of the production process, from manufacturing to retail. Start-ups and small businesses are the backbones of any economy. They are the job creators and the innovators. And the GST system is designed to help them succeed. Here, we will explore some of the major advantages of GST that start-ups and small businesses can enjoy under the GST regime.
Option to claim an input Tax Credit
Input Tax Credit is one of the most important features and advantages of GST. It allows businesses to claim credit for taxes paid on inputs (raw materials, goods and services used for business purposes) against their liability on output (goods and services supplied to customers). This effectively reduces the tax burden on businesses and makes the entire tax collection process more efficient. One of the key advantages of Input Tax Credit is that it helps businesses save on costs. By claiming credit for taxes paid on inputs, businesses can reduce their overall tax liability and free up cash flow which can be reinvested into the business. Another big advantage of the Input Tax Credit is that it helps promote compliance with GST laws. When businesses can claim credit for taxes paid, they are incentivised to comply with GST regulations since any non-compliance would result in them losing out on the ITC benefit. This leads to better compliance with GST and results in a more efficient system overall.
Transport and Logistics Cost Reduction
Before the Goods and Services Tax, businesses had to deal with a complicated web of taxes, which caused transportation and logistics costs to rise. However, the advantages of GST have simplified the tax structure and made it easier for businesses to comply with tax laws. This has resulted in a reduction in transportation and logistics costs for businesses. Under the GST regime, businesses are only required to pay one tax (GST) on the supply of goods or services. This has eliminated the need for businesses to deal with multiple taxes, which was a time-consuming and costly process. As a result, businesses have saved on transportation and logistics costs. In addition, GST online has also led to a reduction in the overall cost of doing business in India. This is because GST has subsumed many indirect taxes, such as excise duty, service tax, and value-added tax (VAT). Consequently, businesses no longer have to incur the cost of complying with multiple tax laws.
Expansion and scalability prospects
Small businesses and start-ups in India are set to benefit greatly from the implementation of GST. For one, it will lead to a more unified and organised market, which will be good for business expansion and scalability. Secondly, the input tax credit system under GST will enable small businesses to claim back taxes paid on inputs and raw materials used in their products or services. This will help reduce their overall tax burden and give them more resources to reinvest in their business. The transition to GST is expected to boost India’s economic growth, creating more opportunities for small businesses to expand and flourish.
Simplified Taxation System
GST is a single, comprehensive tax levied on the supply of goods and services in India. Small businesses, in particular, have benefited immensely from the GST, making doing business easier and hassle-free. The GST online has simplified the indirect taxation system in India by subsuming many taxes into one single tax. This has made compliance easier and reduced the overall tax burden on businesses. The introduction of the GST has resulted in the removal of cascading effect of taxes, which means that input tax credit can be claimed on taxes paid on inputs (raw materials, etc.) used for manufacturing or rendering services. This reduces the overall cost of production/services and makes businesses competitive.
Business-friendly Tax
GST is a business-friendly tax as it helps businesses save on taxes. Businesses can reduce their overall tax liability by availing of the input tax credit. This makes it easier for businesses to comply with the GST laws and improve their bottom line. Moreover, the e-invoicing and e-way bill system under GST is also simple and user-friendly, adding to the convenience of doing business.
One Nation, One Tax
The Goods and Services Tax (GST) is a major advantage for start-ups and small businesses in India. It is a single national tax that replaces multiple state and central taxes, making it easier to do business across the country. GST also creates a level playing field between large and small businesses, as all companies must now charge the same tax on their products and services. This has made it easier for small businesses to compete with larger businesses. In addition, the advantages of GST have reduced the cost of doing business by eliminating many of the fees previously levied on businesses by state governments.