Help SMEs navigate GST

Small businesses need to be guided into the new tax regime, given their lack of awareness

It’s over a month since GST was rolled out on July 1, 2017, and businesses are still seeking clarification on the rules of the new tax regime.

Larger enterprises are well-equipped with technical resources, manpower of GST experts and high capability to spend the required amount to adopt the new rules and procedures. But small and medium enterprises (SMEs) and micro, small and medium enterprises (MSMEs) are finding it difficult to cope with the pace at which the government issued notifications, rules and procedures.

Small businesses are still in a dilemma whether GST registration is required or not and whether they are eligible to opt for composition scheme under GST. They also find it difficult to adopt changes in invoices. They are not aware of the requirements for new invoices under GST.

Another major concern for small enterprises is that of displaying the tax portion in addition to value of goods or services supplied.

Earlier, invoices inclusive of taxes were allowed but under GST there is no such concept and they are required to display taxes separately on their tax invoices.

The small sector, which is largely unorganised, faces problems in understanding the new mechanism of availing credit and paying taxes.

A key concern is the compliance requirement under GST, mainly three returns in a month.

Either they were unregistered before the GST regime or had registration under State VAT laws where they were required to file quarterly returns.

Now, if they opt for composition then there is a restriction that they cannot make inter-State outward supplies. If they take regular registration, then there will be a lot of compliances under GST.

MSMEs don’t use technology for business operations and they are afraid of GST because all compliances will be done digitally. However, use of internet is required only at the time of uploading of returns but it will be cumbersome to upload details of all invoices if MSMEs are engaged in B2B operations i.e. supplying goods and services to other businesses.

Another concern for small enterprises is that they are unable to purchase goods without GSTIN number — State governments delay issuing GTIN number as the time allowed to issue is three days. They face shortage due to denial of supply by their supplier in the absence of GSTIN number.

Also, while SMEs and MSMEs can avail credit of excise duty paid on inputs on deemed basis, to avail all those credits they are required to fill GST TRAN-1 before September 28.

Since the government has extended the time limit to opt for composition scheme for existing dealers, new dealers have a time limit of only 30 days for applying for new registration.

The last date for applying for fresh registration was July 30. But the government should extend the time limit as small dealers are not much aware about rules and procedures under the new GST regime. The time limit should be extended for SMEs and MSMEs atleast.

Considering the shortage of internet facilities and lack of awareness amongst small businesses, the government must run more awareness programs and campaigns to educate them. This will make them understand the benefits of GST for small businesses — removing the cascading effect of taxes, credit of all input taxes paid on inputs, capital goods and services, etc.

The writer is Director, Taxmann

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