Evaluation of the GST Impact on Small and Medium Enterprises

For decades, small and medium enterprises (SMEs) have been looked upon as one of the primary forces behind the growth of Indian economy. The statement further gets strength from the fact that today there are about three million SMEs in India contributing nearly 50% of the industrial output and 41% of India’s total export. For India which is a developing country, SMEs have come up as the prima sector for generating employment and has offered balanced development across sectors. Let’s see how and what would be the impact of GST on small and medium enterprises.

After the passing of the GST law by both houses of the parliament, the industry is welcoming this move by the government for taking up this campaign which has been pending for a long time as a result of political standstill. However, before we conclude the impact and after effects of GST on small and medium enterprises, we need to comprehend how GST would widen the base of taxpayers in the country. Earlier, it wasn’t necessary for a manufacturer with a turnover of INR 1.5 crore or less to adhere to the excise duty rules. However, as all the State and Central level taxes got merged into the realm of GST, any manufacturer who has a turnover of INR 20 lakh or INR 10 lakhs (special category state) will need to adhere to GST and its procedures.

Registration, payments, refunds and returns which are the entire compliance procedures under GST, will now be executed through online portals only and this has lessened the nuisance for the SMEs as they no longer need to worry about interacting with section officers for executing these compliances, which in itself is considered as a problem in the current tax structure. Let’s have a look at some positive impact that GST will bring on the SMEs in India:

• Registering online will smoothen the process for SMEs especially with

Tally ERP 9 as it will ensure a seamless flow of work and the online registration will ensure that the certificate of registration is available on time with minimal interference of government• Due to electronic compliance there will be transparency which will lessen the compliance cost• The refund procedure will be electronic which will further fast track the process and increase liquidity for the SMEs• In Tally GST all returns would be required to be filed electronically and the tax liability adjustment and input tax credit will happen automatically based on these returns

GST has been introduced with a certain aim with the focus being on increasing the taxpayer base; bring SMEs into its scope and make them adhere to the tax. However, in the long run, GST will make these SMEs more competitive with a level playing field between them and the large enterprises. In addition to this, it will help the Indian SMEs to compete with competition coming from outside.

Riyaz Tamboli is a Director at Antraweb Technologies Pvt. Ltd., a leading provider of Tally ERP solutions built on the Tally platform.