Is It Hard For Small Businesses To Register For GST?

With the advent of the GST regime, the Indian taxation system seems to be changing for the better. GST is basically an indirect tax that has set out to replace multiple other taxes in India. The act came into being on 1st July, 2017 eliminating various taxes in the process. 

What is GST?

GST, the abbreviated form of Goods and Services Tax is a comprehensive, destination-based tax that is applicable as value addition, on the supply of goods and services. It follows the concept of one country – one tax. 

Goods and Services Tax has eliminated many state and central taxes such as VAT, excise, service tax to name a few. GST has helped the country, by removing the cascading effect of taxes. Earlier, consumers had to pay taxes calculated at all levels of the supply chain cycle. But, not anymore. 

Nature of Small Businesses

There are numerous small businesses in every nook and corner of the city. There are grocery stores, medicine stores, bakeries, and small workshops or manufacturing units. Small businesses are mostly registered as independently owned organizations employing fewer people. 

Features of a Small Scale Businesses

  • A small business is often operated by a sole proprietor or LLP.
  • The business operates on a tight budget.
  • Small business owners operate manually, most of the time. 
  • They generally deliver goods and services in a specific community or locality. 

GST for Small Businesses

GST aims at bringing all taxes under one roof. Previously, small business owners had to run to various departments to fulfill all the conditions for various taxes. Earlier, all the taxes together added up to 32 % approximately. However, currently, businessmen are paying taxes at a much lower rate of around 18-22 %. The ease of filing returns online has helped small business owners in concentrating efforts towards business growth and not formalities

Registration Formalities for Small Businesses

Now small businesses can breathe easily. The threshold limit for GST registration has been pegged at 40 lakhs with the exception of north-eastern and other hilly states at 10 lakhs. This limit has been fixed for suppliers of goods. In the case of service providers, the threshold is 20 lakhs for all states, apart from north-eastern and other hilly states, for which it is 10 lakhs. 

Small businesses can register with GST by visiting gst.gov.in. In order to register for Composition Scheme Under GST one has to file GST CMP-02 with the government. You can start the process thereon. All instructions are clearly mentioned on the website. And it is self-explanatory. Secondly, many professional bodies are present in the market, which can help you with the registration and filing process. Once you get the hang of it, you can do it on your own. It is very business-friendly. This should be done at the very beginning of the financial year. 

Composition Scheme Under GST

The GST council has come up with a new structure for the Composition Scheme Under GST. The composition scheme came into effect from 1st April 2019. It covers restaurants, manufacturing, and other trading units having a turnover of 1.5 crore, against the earlier threshold of 1 crore. For the north-eastern states and hilly states, the limit is 75 lakhs. 

As per the directive of the 32nd GST Council Meeting, service providers can also opt for the scheme, with a threshold limit of 50 lakhs. 

Conditions for Availing the Scheme

  • Anyone opting for the scheme cannot claim any input tax credit. 
  • The dealer cannot supply GST exempted goods and services.
  • The business owner has to pay taxes at a normal rate under Reverse Charge Mechanism. 
  • If any business owner has multiple businesses, all his businesses registered with a single PAN will come under the purview of GST. 
  • The taxpayer has to mention “composition taxable person” on all hoardings, signboards, and bills. 
  • As per the CGST (Amendment) Act 2018, any manufacturer or supplier can supply goods equivalent to 10% of the turnover or Rs.5 Lakhs, whichever is higher. 

Billing procedure for a Composition Dealer

  • One of the rules under the scheme is that a composition dealer cannot raise a tax invoice. 
  • They need to pay tax from their own pockets. 
  • The business owner has to issue a bill of supply. 

GST Rates Under Composition Scheme

Manufacturer and Traders – 0.5 % CGST + 0.5 % SGST = 1 %

Restaurants that do not serve alcohol – 2.5 % CGST + 2.5 % SGST = 5 %

Others – 3 % CGST + 3 % SGST = 6 %

Returns and Compliances 

Composition scheme enlisted businesses need to file quarterly return GSTR – 4 on the 18th after the end of each quarter. Apart from that an annual GSTR – 9A needs to be filed by 31st December of the next financial year. 

Thus, the new scheme for small businesses has made life easier. The business owners have less compliances, less tax liability and more liquidity. It has made it easier to concentrate their efforts on the actual business. It has reduced the financial burden on small-scale businesses. Being an online process, it has eliminated a lot of confusion and paperwork. The government hopes to increase jobs and improve the economy of the country in this manner and so far the going is good. Now we need to wait and watch, whether can climb up the ladder of success and stand at par with other global giants.

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