GST Legacy

Impact of GST on TradersLegacy

The introduction of Goods and Services Tax (GST) is a landmark in India’s taxation regime. GST is hyped to simplify doing business in India, allowing supply chains to be integrated and aligned, as well as allowing for greater transparency. Here’s understanding in a little more detail, how life will change for a trader post GST.

Increased Threshold Limit for Registration

Post GST, a unified threshold limit of INR 10 lakhs for special category states (Uttarakhand, Himachal Pradesh, Sikkim and the 7 NE states) and INR 20 lakhs for rest of India has come. This especially helps start-ups and new businesses, who can leverage on the increased limit, to concentrate more on setting up the business, rather than take the tension of compliance in the early days.

Increased Composition Levy

The composition threshold limit has increased from INR 50 lakhs to INR 75 lakhs, while that for Special Category States remained at INR 50 lakhs. For any trader, this extra margin of INR 25 lakhs is definitely a huge positive sign, as all he would need to pay is a floor rate of 1% GST computed on his turnover or 5% GST if he is running a small restaurant. Also, the government may further increase the threshold limit of 75 lakhs to a maximum of 1 crore.

Availability of ITC for Excise

Earlier, a trader was not eligible to take Input Tax Credit (ITC) for excise, which is ultimately passed on by him as cost to his buyer, leading to increased costs. Post GST, the cascading effect of taxes will be eliminated as CGST will be levied as an equivalent of excise. Since the full credit of input CGST will be available, there will be an unrestricted flow of ITC across the chain. An SME can thus utilize the same to off-set his tax liability with a single registration.

Availability of ITC for Input Services / Business Expenses

Post GST, the concept of “furtherance of business” has been introduced, whereas a trader can avail ITC on services utilized in the course of business such as advertising services, promotions etc. This boosts his profitability and impacts positively on his working capital as well.

Full and Immediate ITC on Purchase of Capital Goods

Post GST, the treatment of capital goods and goods for trade becomes the same, and full ITC will be available on the purchase of capital goods itself. The noteworthy exemption is motor vehicles on which ITC cannot be availed, unless used for providing taxable services such as transport of passengers or goods on motor vehicles.

Opening up of Markets across India

In the GST regime, IGST replaced CST, thus placing both inter-state and local traders on the level playing field. Another advantage is the removal of entry taxes, as goods cross state borders. This ensures that good quality products being manufactured in one part of the country will find markets in the farthest part of the country – opening up India as a common market for all traders.

Blockage of ITC due to Non-Compliance by Supplier

Post GST, compliance in general and ITC is dependent on invoice level information – as invoice matching will be the key to avail the correct ITC. One of the genuine concerns hitting the trader under GST, will be the scenario of non-payment of tax by his supplier. As per the GST law, a recipient will get his due ITC, only if his supplier has uploaded all the correct sales invoices, which is matched and acknowledged by the recipient; and, any missing purchase invoices uploaded by the recipient are also matched and acknowledged by the supplier. In short, if a supplier chooses to default, this will lead to loss of ITC for the trader. However, traders can potentially avoid such scenarios, by effective vendor management in advance – identifying vendors who will be compliant, and keeping a watch out for credit rating before doing business with any entity.

Stock Transfer becomes a Taxable Event

Post GST, stock transfer has become a taxable event. While the tax paid will be available fully as credit and there will be no need for credit reversals. This impacts the working capital. This is because, for the tax paid on the date of the stock transfer, the ITC is available only when the stock is liquidated by the receiving branch. Thus, in case the logistics planning is poor, leading to overstocking at branches, working capital will be blocked for a long time – a direct challenge for SMEs who operate with thin working capital. With the seamless availability of credit on inter-state purchase and effective removal of state business boundaries going forward, there could be a potential reduction in the number of branches / warehouses – as they would exist solely for operational reasons rather than for compliance. This could lead to reduction in stock transfers, which nullifies the impact of stock transfer on the working capital of a trader.

Compliance Activity and Costs

Post GST, the depth for 37 returns per year (3 monthly and 1 annually) is more, as all transactions will need to be matched and filed accurately for the right compliance to happen, and the right ITC to be availed. The complexity increases if one has operations across states, since each state will require a separate registration. Traders must invest in the right GST software and technology to ensure that the work gets done accurately and on time.

Overall, GST is good for the trading community. As long as a trader smartly manages his business ecosystem, efficiently manages his supply chain and stays GST compliant – he will continue to reap benefits under GST. However, technology will surely be a game-changer in this regard, as this will be the only way the compliance burden of GST can be effectively absorbed, translating into more business benefits for the Indian trader.

See related articles about India GST

Deskera is GST Ready

Manage accounts, generate invoices and automate billing with Deskera GST Ready Software The launch of the Goods and Services Tax (GST) on 1st of July 2017, is...

What is GST?

The Goods and Services Tax (GST), considered as the most profound reform in India’s indirect taxation system finally becomes a reality. GST anticipates that th...

GST vs Current Tax Structure

GST How is GST different from the Current Tax Structure? Recently, the Rajya Sabha has unanimously passed The Constitution (122nd Amendment) (GST) Bill, 2014....

GST Impact on SMEs

GST GST Impact on Small and Medium Business The Goods and Services Tax (GST) has been heralded as the biggest indirect tax reform in India after Independence....

GST Impact on IT

GST 5 Ways GST will Impact Information Technology The long-awaited GST bill that is expected to unify and simplify the Indian tax structure, will be implemen...

GST Impact on Manufacturing

GST Impact of GST on Indian Manufacturing The manufacturing sector in India is a major economic driver. Today, Indian manufacturing companies have attracted t...

GST Benefits and Impact on Indian Economy

Amidst economic crisis across the globe, India has posed a beacon of hope with ambitious growth targets, supported by a bunch of strategic undertakings such as...

GST Implementation in India

The implementation of the Goods and Services Tax (GST) in India was not an overnight thought. The introduction of the tax reform has demanded both time and pat...

GST impact on the Indian textile industry

India is the second largest fiber producing country in the world with an export revenue of US$ 40 Billion in FY 2015-16. This oldest industry of Indian economy...

GST Impact across Sectors

The Goods and Services Tax (GST), for sure makes businesses gain overall by reducing costs of logistics for both finished goods and raw materials, which is one...

GST Impact on Stock Exchange

Finally, the wait is over and the Goods and Services Tax (GST) is arrived – a single comprehensive indirect tax, levied on goods and services, and aimed at rep...

Why every business needs complete GST solutions

GST Top reasons why every business needs complete GST solutions India’s complex indirect tax structure became simpler and integrated with the new tax reform-G...

GST impact on Indian Pharmaceutical Sector

The Indian pharmaceutical industry is a self-sufficient sector. It is also one of the top foreign earner industries and proudly the third largest pharmaceutica...

Impact of GST on employee benefits in India

The employee-employer relationship is no longer a sole business of the human resource department. The Impact of GST on employee benefit is significant as the n...

GST Software – GST Challenges and Solutions

India’s complex and multi-layered tax structure came to an end with GST implementation on 1st of July 2017. GST gets the credit to make business owners aware o...

GST Software – Ease of GST Filling and One-click ...

What is GST(Goods and Services Tax)? The Goods and Services Tax (GST), considered as the most profound reform in India’s indirect taxation system finally becom...

GST impact on High Sea Sales

The Arabian Sea, Bay of Bengal and Indian Ocean surround the Indian sub-continent and businesses are flourishing on ports. The nine coastal states including Gu...

How safe is your data on the GST Network?

India ranks on the 23rd position among 165 countries on the Global Cybersecurity Index (GCI), released by International Telecommunication Union (ITU)—telecommu...

Is GSTN Safe

Is GSTN Safe? Post the GST was implemented the Home Ministry has given security clearance to the Goods and Services Tax Network (GSTN), the information technol...

What are the GST penalties and punishments?

GST GST penalties and punishments The market is a platform full of competitive players and products giving us myriad choices at a competitive price. This is a...

GST impact on Import and Export

Indian economy is one of the fastest growing sectors in the world. The balance of payment is the basic tool to evaluate a country’s economic performance and it...

GST: The Indian logistic industry now and then

The logistic industry is a major support to the Indian economy contributing 4.7% to the GDP. The value of this industry is $130 billion and sadly one of the mo...

Impact of GST on Traders

The introduction of Goods and Services Tax (GST) is a landmark in India’s taxation regime. GST is hyped to simplify doing business in India, allowing supply c...

Post GST, here’s how Indian Govt wants to ensure ...

GST Post GST, here’s how Indian Govt wants to ensure smooth movement of goods in the country The implementation phase is tenacious when it is about an indirec...

Beware! After GST, Choosing a Wrong Vendor can ki...

With Goods and Services Tax (GST) , there has been an essential move in how your books are maintained. Till now in the entire tax regime, the main adaptation o...

How to Determine the Place of Supply of Transport...

Under Goods and Services Tax (GST) , ‘supply’ will be the single taxable event and the major transformation that will occur is ‘Destination based consumption t...

How SMEs can adopt GST to balance working capital

The introduction of Goods and Service Tax in India is creating a problem in the cycle of working capital of business houses. Easy liquidity is crucial for a b...

GST, Separate Registration and SEZ unit in India

Introduced in the year 2000, the prime objective of Special Economic Zone (SEZ) is to develop the export scenario in India by attracting more foreign investmen...

Ambiguous GST rules hit Indian businesses

GST was launched on 1st July with the one and only aspiration to consolidate this 2 trillion economy and make business easy across state borders. But it has be...

GST is an inspiration for ‘Make in India’

‘Make in India’ initiative was launched by the government on 25th September 2014 to encourage India as a global manufacturing hub. The one and only impulse o...

The roadmap towards an ideal GST system

GST The roadmap towards an ideal GST system GST is implemented in India and people are still confused with this new tax regime. Critics are wearing their opi...

A quick guide to India GST rates in 2017

India’s biggest tax reform, the Goods and Services Tax (GST) rolled out on July 1st 2017. The tax rates have been finalized for 1,211 items with a majority of...

GST for Entrepreneurs

We have discussed various aspects of GST in the previous blogs, and today we will see the impact GST will have on the entrepreneurship sector. As you must have...

Input Tax Credit Mechanism & Documents required i...

By now, you would be aware that uninterrupted and seamless chain of input tax credit (ITC) is one of the key features of Goods and Services Tax (GST). In this ...

GST for Simplicity

GST is all about simplifying the complicated maze of the indirect tax structure, rates, administration and compliance requirements. Let us see how GST goes abo...

One Tax Multiple Benefits

As you must have read or heard, that GST is a single tax which has multiple benefits for various stakeholders. What are these beenfits exactly? Read on, and fi...

Cases in which registration is compulsory

GST Cases in which registration is compulsory Under GST as a general rule, a person whose turnover exceeds Rs.20 Lakhs (10 Lakhs in special category states) ...

Goods and Services Tax Network (GSTN)

In the third article of the series on GST, we will tell you about GSTN. The Goods and Services Tax Network (GSTN) is a not-for-profit, non-government company p...

GST and Cooperative Federalism

GST (Goods and Services Tax) is also a shining example of co-operative federalism? Let us see how. It all began with the Centre and States agreeing to have co...

Don’t just take our word for it.

Customers love Deskera!

Run Your Business With Deskera

Why use 3 different SaaS tools, when Deskera can provide all 3 use-cases through a single software?
Run your Business with Deskera