THE GUIDE BOOK ON GST

Introduction and Meaning of the Bill:

CGST Act 2017: GST (Goods and Services Tax) or CGST (Central Goods and Services Tax) was introduced as The Constitution (One Hundred and Twenty Second Amendment) Act 2017, following the passage of Constitution 122nd Amendment Bill. CGST bill was introduced in Lok sabha on 23rd March 2017. Later on 12th April 2017 Dr. Pranab Mukherjee the then President of India gave the consent to the bill. GST is an indirect tax throughout India to replace taxes levied by State and Central government of India on goods and services.

Registration:

People liable to register under this Act: Every supplier shall be liable to be registered under the Act in the State from which he makes a taxable supply of Goods or Services or both. Registration is required if his aggregate turnover in a financial year exceeds INR Twenty Lakhs. This threshold limit will be INR Ten Lakhs if a taxable person conducts his business in any of the special category states as specified in sub-clause (g) of clause (4) of Article 279A of the Constitution i.e. Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.

ENROLLMENT:

Existing Taxpayers of VAT, Service Tax, Central Excise have to visit the following web site https://www.gst.gov.in/ to register.

Follow the below protocol to register for GST:-

1. Click the above mentioned link,
2. Click on the following text: “Click here for Enrolment Schedule for your state.
3. Register as new user by selecting “new user login” and fill up your credentials. Click on continue.

Now Enter Provisional ID as provided by Tax Authority in sealed envelope.(It has to be collected from the concerned GST offices in the areas).Now feed your data as required and enclose necessary documents.

Mandatory documents for GST Registration:-

Salient features of GST:

1. Applicable to both intra-state and inter-state transactions
2. Applicable at the time of supply
3. Administration at state and central level
4. Follows a two-rate structure
5. Levied on import of goods and services in India

SME Guide:

DEFINITION:

“SME (small-to-medium enterprise) is a convenient term for segmenting businesses and other organizations that are somewhere between the “small office-home office” (SOHO ) size and the larger enterprise .” The European Union has defined an SME as a legally independent company with no more than 500 employees.” But in India, Small and Medium sized enterprises are enterprises where the investment in plant and machinery or equipments is between Rs 25 lakhs to 10 crores in case of manufacturing and is Rs 10 Lakhs to Rs 5 Crores in case of a service sector enterprises.

The Act provides for classification of enterprises based on their investment size and the nature of the activity undertaken by that enterprise. As per MSMED Act, enterprises are classified into two categories – manufacturing enterprises and service enterprises. For each of these categories, a definition is given to explain what constitutes a micro enterprise or a small enterprise or a medium enterprise. What is not coming under the above three categories would be considered as a large scale enterprise in India.

What are Manufacturing Enterprises?

Manufacturing Industries are those industries which are engaged in manufacturing and production of goods. As per schedule 1 of Industries (Development and Regulation) Act,1951 the industries are specified by manufacturing or production of goods or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. Manufacturing Enterprises can be defined in terms of investments in plant and machinery.

What are Service Enterprises?

Such enterprises are engaged in providing services or rendering of services. Also this can be defined in terms of investment in equipments.

Impact of GST on SMEs

As every coin have two sides, so does GST. It can affect SMEs positively and negatively too. Some of the impacts are listed below:-

Positive impact

1. Initiating a business becomes convenient.

GST has standardized the entire process of paying taxes. At present, the Sales Tax Department has compartmentalized the turnover slabs which require VAT registration. Because of this, a business venture with multi-state operations has to abide by varied tax norms applicable to different states. This not only complicates the process but also creates additional procedural fees. This burdens the price-sensitive SMEs. Hence, GST has proven to be the boon for these price-sensitive SMEs helping them by uniforming the entire process.

2. Enhanced the expansion of SME Market across borders

In the present scenario of the tax duties, big corporations acquired goods based on the locality of the SMEs with an intention of minimizing the overheads. Due to this, the SMEs limit their customers within a confined boundary since they will suffer from the ultimate burden of tax on interstate business, which thereby reduces their customer base. However, the implementation of GST will nullify the burden on the SMEs as the tax credit will transfer regardless of the emplacement of both the traders. This aids the SME segment to extend their services across borders with no restraints. 

3. Minimize logistical overheads

At present, when supplying goods across borders, traders suffer from the time-consuming tax procedures on toll check posts. After the implementation of GST which is tax neutral, it will be very convenient for the traders as it will eliminate these time-consuming and hectic procedures. According to a survey, the logistical cost for the companies producing a big chunk of goods will be minimized by around 20%. This is a substantial amount for the existence of SMEs.

4. Extends support to SMEs to deal with sales and services

There won’t be any differentiation between sales and services which will again simplify the taxation for the SMEs dealing with sales and services. The tax will calculated in total without any differentiation. This way, GST will equalize the tax on sales and services.

5. Unified market

Implementation of GST will enhance the flexibility in trade of goods beyond the state borders thereby reducing the cost of dealing the business as the reform will exclude multiple taxes imposed by the state and the Central Government.

Negative impact

1. The burden of lower threshold

The current threshold in the central excise law is INR 1.5 crore. However, after the implementation of GST which has reduced the threshold to be around INR 10 lakhs to increase the tax net, and INR 5 lakhs for northeastern states, all the SMEs which were trading with no levied duties will have pay a substantial amount from their capital. Hence, all the exempted SMEs will be burdened with a huge amount of tax coming from their working capital which is a major disadvantage coming from the implementation of GST.

2. No tax differentiation for lavish commodities and services

As GST has brought tax neutrality with it; there won’t be any differentiation between luxury commodities and ordinary goods. Previously, the government very well differentiated between the taxes on luxury and normal goods which were very convenient for the middle class sector. However, post the implementation of GST, rich will become richer and poor will become poorer which is a matter of concern. It is not an ideal situation for those competing with the MNCs.

3. Increase in the cost of Product

In the cycle from manufacturer to customer, the end customer would suffer from the implementation of GST due to unavailability of input credits to him unlike the manufacturers who have the tax credits with an allowance to reject the tax duty. GST will be levied on supply thereby increasing the cost of the product posing a major problem for the consumers.

4. Selective levying of taxes

Industries suggests that GST contradicts it’s own “unified market” theory as it won’t be implemented on any alcohol or petroleum based business further creating a gap between industries. This will create a lot of controversies in the business industry.

The industries that will be affected from the implementation of GST are:-

1. Online Retail
2. FMCG
3. Dealers
4. Imports & exports
5. Manufacturing
6. Logistics
7. Pharmaceauticals
8. Textiles
9. Services
10. Infrastructure
11. Supply chain
12. Telecom
13. Hospitality
14. IT & IT components
15. Warehousing
16. Energy
17. Transportation
18. Retail

This was the brief idea about the GST act and it’s repercussions after implementation. It will have a 40-60 ratio on the benefits and disadvantages on SMEs where the differentiation on the duties and lower threshold poses a major threat to the SMEs striving hard to compete with the MNCs.