The Goods and Services Tax (GST) is one of the most significant tax reforms in India, which came into effect on July 1, 2017. It has been more than three years since the implementation of GST, and it has impacted businesses in various ways. One of the sectors that have been significantly affected by GST is the Micro, Small, and Medium Enterprises (MSMEs) sector.
MSMEs are the backbone of the Indian economy, as they contribute significantly to the GDP and provide employment to a vast number of people. GST has impacted MSMEs in both positive and negative ways. Let's look at how GST has impacted local MSMEs.
Positive Impact of GST on Local MSMEs:
1. Simplified Taxation System: GST has replaced multiple taxes like VAT, Service Tax, Central Excise, etc. with a single tax. It has simplified the taxation system, which has reduced the compliance burden on MSMEs.
2. Increase in Exemption Limit: Under the earlier tax regime, businesses with an annual turnover of Rs. 20 lakhs or more had to register for VAT. However, under GST, businesses with an annual turnover of up to Rs. 40 lakhs are exempted from GST registration. This has provided relief to small businesses and has encouraged more people to start their businesses.
3. Boost in Export: GST has helped MSMEs to boost their export activities. Under GST, exporters can claim a refund of the GST paid on inputs used in the export of goods and services. This has made the exports more competitive and has provided a boost to the MSMEs sector.
4. Uniform Tax Rates: GST has brought in uniform tax rates across the country. This has eliminated the earlier scenario where businesses had to pay different tax rates in different states. This has provided a level playing field to all businesses and has encouraged businesses to expand their operations to other states.
