Why Should You Smartly Pay and get Maximum Benefits from GST?
According to a report, the GST revenue collection of Rs.1.41 lakh crore in April 2021 was 14% higher than March’s Rs.1.24 lakh crore. This data indicates the positive impact of GST on the Indian economy.
Perceived as a big game-changer, the introduction of GST has removed the cascading effect of traditional tax regimes. Some might find its impact on luxury items and goods, but the benefit scale may balance the changes.
The removal of multiple tax levies has brought down the cost of household commodities and raw materials. It has also created lucrative prospects for individuals planning to invest in small firms and startups. Here are some benefits that substantiate the advantages of GST online payment for sustainable revenue.
What are the advantages a business gains by paying GST?
- Remove cascading effect
GST was designed to remove the effects of multiple indirect taxes by eliminating the cascading effect, defined as ‘Tax on Tax’. For instance, an individual offering service worth Rs.50,000 had to pay 15% service tax and 5% VAT on supplies worth Rs.20,000. In total, he was obligated to pay Rs.8,500.
This obligation has been reduced to Rs.8000 as the GST would be 18%, where GST on supplies of 5% is deducted. This indicates a lucrative way of savings, usable for future investments.
- Threshold for business registration
The previous tax regime obligated any business with an annual turnover of Rs.5 lakh to pay VAT, which is now Rs.40 lakh under GST. Managing fund for tax payment became troublesome for many MSMEs and startups without a regular income flow. The VAT percentage differed according to the state.
Moreover, service tax was only exempted for enterprises with revenue less than Rs.10 lakh.
Under the new GST regime, this stringent threshold was updated to Rs.20 lakh. Allowing multiple lucrative exemptions for small service and trading companies is a way in which GST impacts a business.
- Composition scheme
Another significant advantage of GST is for service providers with a turnover of Rs.20 to Rs.75 lakh and other businesses with yearly revenue of Rs.1.5 crore. These lowered tax rates are available under the composition scheme. With the GST online payment, many MSMEs and small-scale firms can now receive the benefits of reduced acquiescence burden and tax.
- Reduced obligations
The previous tax regime required business owners to pay a substantial amount tagged as VAT and service tax. These taxes had their returns and percentage. A business owner also needed to pay excise duty. GST eliminated these concerns by unifying tax provisions. Now firms have to file about 11 returns, where four are general returns that apply to every tax-paying individual. Technically, the primary GSTR-1 is to be manually populated while GSTR-2 and 3 are auto-populated. However, one needs to know the steps to file one’s GST return online to receive benefits.
- Affordable logistic expenses
Reduction in unnecessary logistics cost has led to increased profits for businesses involved in the supply of goods across states. Earlier, companies had to maintain multiple warehouses in various states to store goods and avoid CST and state entry taxes. These warehouses had to function below their capacity forcing disruption in operating cost. Now numerous companies are setting up storehouses in strategic localities with fewer costs. Hence, the reduction of logistic expense is the impact of GST on working capital for businesses involved in interstate transportation of goods.
Individuals planning to commence their startups or SMEs with limited capital can make the most out of this unified tax. They can save significantly to expand their production scale and simultaneously claim tax benefits on the mentioned fields. For instance, if there is an imbalance in the working capital or liquidity, one can look for alternatives like a business loan.
Since paying tax on time also plays a part in improving creditworthiness, one can easily avail credit from lenders. NBFCs like Bajaj Finserv offer substantial credit at affordable interest rates to individuals with good credit and repayment histories.
They also extend pre-approved offers to make the application process simpler. These apply to different financial products like a personal loan, business loan, etc. You can check pre-approved offers with a few details, including name and phone number.
Since market survival is a challenge for many firms, smart investments and efficient working capital can help a business operate smoothly. Here, savings from GST work as a ladder to sustainable growth aspects.