Introduced in 2017, Goods and Services Tax (GST) remains an issue of much debate. The effectiveness of the tax form has been under scrutiny because it withdraws from all other distributed indirect tax and is assumed complex. Though, in fact, GST is comprehensive and has instead simplified and revolutionized indirect taxation in India. Particularly, the GST regime provides significant benefits, including easy SME loan and MSME loan availability for the primary economic growth drivers.
Here’s a look at how GST benefits SMEs:
Ease of doing business: GST brings indirect taxation under one roof, which makes it easier for companies to adhere to different taxation rules. Moreover, this new tax regime eliminates the need to head to different departments to collect and submit tax documentation, thereby saving time and enhancing the ease of conducting business.
For firms with cross-state operations, this centralized tax regime makes tax filing easier, transparent, and faster.
Easy availability of business loans: GST has made the availability of MSME loan quick and simple. Businesses with a GST certificate easily meet the MSME Loan eligibility criteria because of the authentication.
Also, the online availability of loans for small and medium enterprises has improved significantly. Businesses now can get loans in a matter of some easy clicks.
Lower taxes: GST is lower than all indirect taxes combined. All previous indirect taxes levied on SMEs and MSMEs totaled up to 32%. However, with GST, it has been lowered to around 18-22%.
Moreover, businesses had to make different VAT payments based on their turnover earlier, whether it is Rs. 5 lakh or Rs. 10 lakh. With GST, there is no need to apply for GST return if the turnover is less than Rs. 10 lakh. Hence, lower the taxes, higher the profits.
Ease of starting a new venture: GST has ended the complex procedure of setting up a new business, which involved applying for VAT registration and abiding by several other taxation rules that varied across states.
With GST, a unified taxation regime is followed across the country. Businesses only need to apply for a single registration to start a new venture.
Reduced logistics cost: GST eliminates the need for cross-border entry taxes and complex paperwork. With a unified tax regime, state boundaries become less significant, which reduces delay and the overall logistics cost.
GST might seem intimidating at first, but at its core, the concept is simple and rewarding. It is especially so in terms of business loans; something businesses need all the time. For companies that are not GST-compliant, getting a business loan can be a complicated affair.
In association with Tata Capital
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