Goods and service tax (GST) will revolutionize the Indian tax structure and is considered the largest tax modification since Independence. It aims to simplify indirect tax mechanism by replacing multiple taxes, such as service tax, state value-added tax (VAT), and central excise among others. The tax will be applied to the transaction value, which includes commissions, packaging, and other costs.
This new tax regime is expected to bring uniformity across the entire nation. You will also be able to avail of full tax credit from capital goods and inputs, which may be set-off against the GST liability.
Here are five salient features of GST
- The tax will be applicable on interstate and intra-state transactions.
- It will be applied at the time of supply.
- It adopts a two-rate structure.
- It is administrated at the state and central level.
- It is levied on importing services and goods in the country.
Let us now understand how the levy of GST will impact your business
1. Commencing operations will be easier
Presently, Sales Tax authorities apply different turnover slabs for VAT registration. This means if your business operates in different states, you need to adhere to the various tax laws applicable in each state. This makes the entire procedure complicated and increases costs. With a uniform GST regime, the process will be standardized boding well for business owners like you.
2. Better market expansion
Under the current regime, larger companies purchased goods based on the location of business operations to decrease their overheads. This limits the customer base for your business because of the extra tax burden payable on inter-state sales. When GST is implemented, the tax credits available will nullify this burden because as GST is not applicable based on the location of your business and your customers. Therefore, you will be able to expand to other markets and grow your business. To take advantage of the potential growth opportunity, you may consider availing a business loan from financial institutions.
3. Reduced logistical expenses
Time-consuming and cumbersome toll check and cross-border tax procedures will be eliminated because GST will be tax neutral. Researchers estimate logistical costs to reduce by as much as 20% for bulk manufacturers. These savings will help your business reduce costs and increase profitability.
4. Improved sales and services
The new tax regime will not distinguish between sales and services. This will be beneficial for small businesses dealing in sales and services. This is because taxation procedure will be simple and levied on the total turnover.
Implementation of GST is expected to boost Gross Domestic Product (GDP) and lower the fiscal deficit. Lenders like Tata Capital expect more small and medium enterprises to apply for business loans to expand their operations in the post-GST environment.
These loans are available for various purposes, such as expansion, infrastructure, working capital, and other business requirements. You may apply for a commercial loan online through the lender’s website for a simple and quick approval.