The approval of the GST Bill in the parliament and the coming launch next year will be a truly game changing event for Indian Economy. In this article we summarise the key benefits as FundsTiger sees it and the changes that it would mean for Small Business and SMEs.
Applicability of GST
Goods and Services Tax (GST) is applicable to all businesses with Revenue/Turnover > 20 lakhs
Is it a new Tax or does it replace existing ones?
GST replaces a bunch of taxes. It subsumes a majority of indirect taxes like excise, sales, VAT services levies.
GST would eliminate the cascading impact of taxes, hence it would improve make Exports more competitive for businesses. As a result, this should have a positive impact on the GDP.
GST should make the trades within India easier with reduced logistics costs. Today, by logistic companies estimates, their trucks spend as high as 60% of their time in dealing with the check posts and Excise at the various State borders within India. For example, the average distance traveled by transportation trucks in India per day is ~30% of their counterparts in US. So the transportation would become more efficient in terms of cost, time and utilisation as well.
Tax evasion would reduce. Let’s take an example. GST would allow a Manufacturer of Toys to claim tax credits for the raw materials he bought in the tax chain from the Suppliers of the toy raw materials. The tax chain is tied together by the unique GSTIN of every business entity and the unique Invoice number. To claim the tax credit, the Manufacturer would need to corroborate /tie-up withe same GSTIN and the Invoice number. Now, let’s say that the Manufacturer sells the manufactured toys to a Shop Seller. In case, the Shop Seller tries to evade tax, he could be caught based on the audit of others (Manufacturer) in the tax chain based on the unique GSTIN and the Invoice numbers.
Overall, GST will simplify the tax processes / ease of business due to it being a single tax subsuming many existing taxes like Excise, VAT, Service Taxes, State Taxes and levies etc.
FundsTiger and GSTN
FundsTiger is eagerly looking forward to introduction of GST. Apart from simplification of taxes, GST promises to be very useful for lenders as it can provide a trusted source of inward and outward invoices of a company.
FundsTiger has done basic integration testing against this sandbox and is getting GST ready to figure out the invoices of a company applying for a loan on the FundsTiger Platform based on the authenticated information provided by the loan applicant company.