The Goods and Services Tax system introduced by the Government of India in 2017 has revolutionized the Indian taxation regime. The GST system is a ‘one tax for all’ system that bought unity among all taxpayers in the country. The GST system requires a business to collect taxes levied on all products and services.
The GST regime requires that all businesses that have a turnover that exceeds Rs. Forty lakhs to register as a normal taxable person. This is called the process of GST Registration that is required for all such businesses. For certain businesses, this process of registration is mandatory. If such businesses that satisfy either of the clauses above do not register under the GST regime, it will be considered an offence and heavy penalties can be levied.
The GST taxations rules state that the following people should register
for GST:
- Individuals registered under the pre-GST law
- Businesses that report turnovers over Rs. 40 lakhs (or Rs. 10 lakhs for hill states and states in North Eastern India)
- Casual Taxable Person(s)
- Input Service Distributors and Agents of Suppliers
- All E-Commerce Aggregators
- Individuals are supplying through E-Commerce Aggregators.
The GST Registrations Process is fairly simple and not that arduous. It involves getting registered with the authorities and obtaining a GSTIN number for your business that can be used for all future references to the GST queries of your business.
While the penalties levied on non-payment or evasion of tax are huge, GST carries some benefits. Over the years, many businesses, small or large, and even start-ups have been able to avail the benefits of registering for GST.
The benefits offered by registering under GST are:
- Before 2017, the common practice was to pay service tax, sales tax and even VAT on any goods and services purchased. Not only were these heavy burdens on the customer, but they were a very costly affair for any business as well. The introduction of GST has eased this process. Businesses had to comply with distinct guidelines for the service tax as well as VAT guidelines. Under the GST regime, businesses can find it easier to file their tax returns in one go. The need to comply with separate guidelines and rules has been eliminated.
- GST is not very rigid and does not come with a huge set of rules. This makes GST a very effortless taxation regime. Earlier, businesses had to comply with tax guidelines set for each different type of indirect tax. That used to be very time consuming. With the introduction of the GST system, businesses only need to comply with one set of rules and guidelines. This makes the tax filing process happen in a much quicker and efficient manner. The businesses can spend less time conforming to tax guidelines and invest more time into the betterment of the business.
- Due to GST, a trickle-down effect has been observed in the form of reduced transportation costs. With the new GST regime, the coordination and costs on trucks and other transportation logistics have become more fluid. Earlier, the presence of multiple indirect taxes made logistics a very costly affair as companies had to make sure they were minimizing the amount spent on inter-state taxes. Now, with GST, the transporting part of the business has become relatively easier. This has reduced costs that have attracted businesses to enter India and have also increased the demand for borrowings.
- GST has made it clear for most businesses operating in the eCommerce realm. The Government realized that eCommerce is the future of doing business, and all impetus should be given to boost the industry. In the earlier tax regime, the different states had different taxation laws. States like Uttar Pradesh levied taxes on online eCommerce brands transporting items or products into the state. While on the other hand, states like West Bengal and Rajasthan did not ask for any taxes as they viewed eCommerce platforms as facilitators. These varying tax rules for each state did not help too much in boosting the eCommerce sector. However, with the introduction of GST, more and more businesses are shifting to online methods of doing business. GST has done away with all these differential rules for online businesses in different states. GST has brought the indirect tax system under one umbrella, making it easy to facilitate business for eCommerce platforms.
- As mentioned earlier, GST has not only given a major boost to eCommerce businesses, but traditional businesses have also benefitted from the GST regime. The costs of doing business and even starting one has become more affordable. In the earlier indirect taxes system, while the customer paid the tax, the company too had to bear a few additional costs in paying those taxes to the government. With the introduction of the GST system, the company or the business acts merely as a middleman. The further costs that were incurred by the business earlier have now been eliminated. This makes the filing process at the end of the financial year very easy too.
- The GST Registration can be beneficial for all businesses in the long run as well. Paying taxes does not only add to your character as a responsible business but also helps in increasing the reputation of the business. The registration process needs to be carried out by any business that has a turnover that exceeds Rs. 40 lakhs. This would mean that all businesses registered are highly sales driven and have large volumes of sales occurring at regular intervals. This builds the reputation of the business as a very feasible and viable investment for investors. Registering under GST, therefore, gets you further investment as well. And with more investment, the business can expand into new domains.
Conclusion
It is clear why GST is a very beneficial taxation regime and why businesses should look to register for it. It instils a sense of financial discipline and responsibility within the business. The GST can have a future for the business in the long run by being attractive and cost-effective.
