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3 Points which explain why GST is a boon for small Businessmen

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Unlike many opposition parties business across the world have appreciated Modi Govt. courageous move to implement GST and unite India under one tax system. Indeed this is second unification of modern India once happened from cruel colonial rule and today from regressive tax system which choked our economy. GST bring various advantages which you must have seen so far. Here are a few which make this system a boon for Indian economy:

  1. GST eliminates the tumbling effect of tax.
  2. Higher limits for registration.
  3. Lesser compliance.

GST eliminates the tumbling effect of tax.

GST is a comprehensive indirect tax that was designed to bring the indirect taxation under one umbrella. More importantly, it is going to eliminate the tumbling effect of tax that was evident earlier.

Let us understand this with an example. Before GST A service provider for its services charged for example Rs 60,000 and charged a service tax of 15% (Rs 60,000 * 15% = Rs 9000).

Then say, he would buy office supplies for Rs. 10,000 paying 5% as VAT (Rs 10,000 *5% = Rs 500).

Service provider had to pay Rs 9000 output service tax without getting any deduction of Rs 500 VAT which he had already paid for office supplies.

His total outflow is Rs 9500.

Under GST, same service provides pays:

Higher Limits for registration.

Previously under VAT system, any business with a turnover of more than Rs 5 lakh (in most states) was liable to pay VAT. Please note that this limit change state-wise but on an average it was Rs. 5 lakh. Also, service tax was exempted for service providers with a turnover of less than Rs 10 lakh.

Under new system gst registration, however, this limit has been increased to Rs 20 lakh, which exempts many small traders and service providers. Let us understand this with a table.

Lesser compliances

Previously with VAT and service tax, each had its own returns and compliances. Lets understand with following table:

Under GST, there is just one, unified return to be filed. Which means, number of returns reduced significantly. The main GSTR-1 is manually populated and GSTR-2 and GSTR-3 will be auto-populated. There are about eleven returns under GST, out of which four are basic returns which apply to all taxable persons under GST.

Above points are just few to list how GST will be beneficial for small and medium businessmen. With GST totally digitized it will empower businesses to focus more on business rather compliances and accounting. A propaganda spread to derail this system wants to keep Indian economy in primitive system which only hampers our growth and promoted black economy. Just like any other developed economy GST was a necessary step and will be boon for small businessmen and Indian economy in coming years.

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