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Tata Capital > Blog > Loan for Business > Growth Opportunities & Impact of GST on Small Businesses

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Growth Opportunities & Impact of GST on Small Businesses

Growth Opportunities & Impact of GST on Small Businesses

There is no doubt that small businesses have been the unsung heroes of the Indian economy. From being a massive job creator to being the primary growth driver of the economy - that is what small businesses have been doing for decades.

But with GST, there are a lot of apprehensions about its impact on these small businesses. GST is already being hailed as a game changer for the economy and is expected to widen the taxpayer base and simplify taxation. Small businesses are expected to witness a complete transformation of the taxation system with the advent of GST.

Nevertheless, the whole idea of GST is to bring more and more small businesses to the mainstream. This of course has its own burden of compliance and associated costs to them. But in the long run, it will turn these small businesses more competitive and allow a level playing field between large organization and them.

Earlier small businesses used to face trouble with credit access, as lenders were not very willing to lend to those which were part of the unorganized sector. But with GST ensuring that even small businesses join the organized tax regime, it will improve lenders’ ability to assess customers’ creditworthiness due to wide availability of centralized data. This in turn will help lenders to extend business loans to these small business and fuel their growth plans.

But it is very important to understand here that all small businesses might not be able to make the switch to GST. Those who join the mainstream and utilize GST to its full potential will see their businesses grow by leaps and bounds. There will be value migration from the informal to the formal sector and the informal players will be losing out to the better prepared players of the formal sector. But this is where the growth opportunities lie for those small businesses which are ready to accept the change and partner with it.