Tips For Small Businesses To File Tax Under GST

The Micro, Small and Medium Enterprises (SMEs) sector in India has been the primary growth driver in the country for decades. According to the SME Chamber of India, the sector contributes 45 percent of the industrial output, 40% of exports, employs 42 million Indians, and creates an average of one million jobs every year while producing more than 8000 quality products for the Indian and the international markets. It wouldn’t be wrong to say that the implementation of GST will be a big game changer for the sector. GST, in the long term, will bring about many long-lasting changes in the economy such as reduced prices and cost of operations. But the important question now is if the Indian SMEs are prepared for the transition to a new tax regime - a ‘behaviour change’ that will later pave  the way we do business as a country.

Expert estimates say that only about 50 percent of the sector is technologically capable of complying with GST rules. Manpower is also a huge concern for the sector, as many businesses do not have dedicated personnel to follow up with vendors and suppliers and ensure timely payments or invoicing. These are some of the teething troubles that the sector will have to face as the new tax regime comes into force. Knowing these problems in detail makes it easier to recommend solutions, and below you will find some expert tips that can help small businesses to get GST-ready before the tax universe in India changes its colours:

Tip 1: Calculate your ITC like your life depends on it

And truth be told, it actually does! It is very important for SMEs to understand the legislations around Input Tax Credit (ITC). The availability of ITC could determine the cost of compliance and the competitiveness of a business in the GST era. The law allows for ITC to be claimed on expenses incurred for ‘furthering of business’ such as marketing expenses, transport costs etc. SMEs can claim ITC across a bucket of expenses by being familiar with the law and thus reduce operation costs and increasing their margins. Besides ITC can impact your working capital, this makes it all the more relevant to make sure there is good compliance.

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