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Understanding the Impact of Recent GST Reforms on Small Businesses

3 min Read Oct 9, 2024

The Goods and Services Tax in India has changed many things. The recent new reforms that have come in relation to the GST structured system have been liable to affect small businesses to a large extent. As a small business owner, it is essential that you understand how the reforms affect you.

What Are the New GST Reforms?

Some of the ways that the GST Council is working towards simplifying the tax system include reducing the complexity of law compliance for small businesses. This includes the more significant reforms of threshold limits, the composition scheme, and the filing process.

  1. Threshold Limit Enhanced: The government enhances the threshold limit for GST registration. Businesses whose turnover is more than ₹20 lakhs require registration under GST earlier whereas now the threshold limit for those trade on goods is enhanced to ₹40 lakhs, however, for services, it remains at ₹20 lakhs. It follows that most small businesses are exempted from the GST registration process.
  2. Alteration in Composition Scheme: In the composition scheme, small businesses get a reduced rate of tax under lesser compliances. The limits of turnover, for businesses, the government has enhanced. Now, the businesses with a ₹1.5 cr turnover can opt for the same composition scheme. Likewise, service providers with an up ₹50 lakh turnover also now get this relaxed option.
  3. The government has evolved new forms to help in filing: Under the composition scheme, small businesses can prepare under one form, 'GSTR-4.' This will reduce the burden on a small business when filing multiple forms.

Benefits of such Reforms for Small Businesses 

These reforms make the compliance of GST easy and accessible for small business enterprises. Let's check out how they benefit the small businesses:

  1. Less Tax Burden: Due to a higher threshold limit, many small businesses are exempted from registering under GST. This means that there is no need to worry about collecting and paying GST. Overall, this brings down the tax burden on small enterprises.
  2. Lower Compliance Cost: The facilitation of compliance will save small businesses less time and money for compliance. They do not need to hire accountants or tax professionals in order to file multiple forms. This saves much money to the small business establishments.
  3. More Cash Flow: Fewer taxes and easier compliance result in better cash flows. This enables the small businesses to invest much money into the business where there is much hope of expansion and growth.
  4. Greater Ease: Composition schemes of GST are now available to a greater number of small businesses. This enables them to avail of a lower tax rate and eliminate the tedium of GST returns. It provides them with greater ease in dealing with taxes.

Challenges of GST Reforms for Small Businesses

While the benefits accrue, the challenges too are there. Small businesses must take into account such reforms to prevent deficiencies as well.

  1. New Development: Small business owners need to be aware of the latest GST reforms. Rules are constantly changing and may bring penalties if missed once. One needs to keep oneself updated with new announcements in circulation.
  2. Compliance Management: With even simple process requirements, small businesses have to be compliant. This would mean proper record-keeping, filing returns in time and pay taxes when tax is due. Small business owners would have to spend a little time being educated about all of these requirements.
  3. Access to Technology: All GST filings would have to be done online. Companies have to be able to easily access and use available technology and the internet to file their returns. This could be an issue for companies located in areas that are not easily accessible or companies without much technology experience.
  4. Employee Training: Smaller businesses have to be trained to comply with the GST. In other words, they have to understand how to generate the GST invoice, maintenance of records, and filing of returns. Training employees is time-consuming and labor-intensive.

How Can MindYourTax Assist Small Businesses?

At Mind Your Tax, we know just how daunting GST can be for small businesses. Our team of experts will guide you through recent reforms and ensure you adhere to the law. Whether it's a query on GST registration, filing returns, or getting you understanding the composition scheme, we are here to help out as the best GST consultant in Bangalore.

With Mind Your Tax, you can forget about running your business and let us take care of your GST compliance. Our services ensure a hassle-free, time-efficient, and cost-effective process. So rest assured that all taxes will be taken care of, and you'll be able to take your business forward.

For more information on how Mind Your Tax can help you with GST compliance, check our official website.