The stage is now set for GST roll out on July 1, 2017 with consensus in the GST council on the contentious issue of sharing of administrative powers between the Centre and States. This comes as a relief to the Centre after concerns that the demonetisation announcement may cause states to put up their price and derail this most sweeping reform since independence that has a deadline to be in place by September 2017.
The GST Bill will have to be cleared by the GST council in its next meeting on February 18 after which it will be presented in the Parliament in the second half of the Budget session starting March 9. All rules need to be framed and announced latest by March 31. Further the council needs to finalise the classification of products and services and rates (5%, 12%, 18%, 28%).
This gives just 90 days for SMEs to prepare and be ready to go live by July 1, 2017.
The primary intent of GST is to expand the base of indirect tax payers by covering most transactions and not to increase the overall tax outlay of businesses.
A major implication from a business standpoint for SMEs would be, creation of a level playing field by having a low threshold which should de-motivate larger organizations from tax evasion practices like having multiple entities. This could also put pressure on SMEs who would no longer be able to avail excise duty exemptions but will have full GST impact thereby increasing competition from larger organizations.
According to CA Ashok Batra, there are three areas that SMEs need to be aware of while moving into the GST regime –
CA Kamal Aggarwal, outlines several implications for SMEs and tax consultants and steps to be taken to streamline implementation and administration:
There are serious cash flow implications for SMEs given issues of getting credit from suppliers. GST will be technology driven given digital invoicing and therefore unchartered territory for several small businesses
SMEs needs to take the following urgent steps:
This will ensure smooth transition towards GST which is expected to drive several benefits for the economy including, incremental GDP growth of 1%, improvement in export competitiveness by 5%, increased FDI owing to transparency in indirect taxes and common market advantages across the country