How will GST impact a small business...selling either goods or services

1. GST AND ITS IMPACT
ON
SMALL BUSINESS
Presented by
CA Piyali Parashari

2. Lets Study the BASICS
Small business
selling GOODS
Small business
selling
SERVICES
All goods and services have
been put into four tax slabs of
5%, 12%, 18% and 28% .
Several mass-consumption
items will attract 0% tax.
GST is a Single Tax scheme which
clubs all Indirect Taxes into one.
Hence both PROVIDERS OF GOODS
(earlier paying excise duty, VAT,
Octroi..) and PROVIDERS OF
SERVICES (earlier under Service
Tax) fall in this Scheme
Hence GST
covers both
CA Piyali Parashari

3. Basic Threshold Limits
REGISTRATION COMPULSORY:
When turnover is greater than
` 20 lakhs in a financial year.
REGISTRATION OPTIONAL:
Businesses having turnover of
less than` 20 lakhs in a
financial year are not required
to be registered for GST.
However registration is
optional. (Limit is ` 10 lakhs
for North Eastern States)
E-COMMERCE SELLERS:
REGISTRATION IS COMPULSORY
Even though turnover is less than ` 20 lakhs in a
financial year. No thresh hold limit is applicable.
CA Piyali Parashari

4. Small Business Selling GOODS
COMPOSITION SCHEME:
1. It is available for suppliers of GOODS only and restaurant sector
taxpayers
2. When turnover (sales) of business is < ` 75 lakhs in a financial year
3. OPTION is to be given at the time of registration-to OPT or NOT
4. Tax rates are 1% for manufacturer, 2.5% for restaurant, 0.5% for
other suppliers
5. No Input Tax Credit: The taxpayer cannot get any credit of GST paid
on inputs and raw materials nor can his customer get Input Tax
Credit for goods bought for his business.
6. Applies only to taxpayers selling GOODs within the state
7. For those who are also selling outside the State this Scheme is not
applicable.
8. The dealer under this scheme cannot issue TAX Invoice, only a Bill
of Supply
CA Piyali Parashari

5. INPUT TAX CREDIT
In GST there will be a seamless flow of input credit across the
chain (from the manufacture of goods till it is consumed) and
across the country.
When you buy a product/service from a
registered dealer you pay taxes on purchase.
While making sales, you collect tax .
Tax collected is adjusted with the tax you already
paid at time of purchase and balance liability of
tax (tax on sales (minus) tax on purchase) is to
be paid to the government.
Input Tax Credit is not available for small business opting for
COMPOSITION SCHEME . CA Piyali Parashari

6. COMPOSITION SCHEME: MERITS &
DEMERITS
MERITS
1. Limited Compliance: Lesser
returns , tax invoices and
books. 37 returns for normal
GST taxpayers to be filed
electronically.
2. Limited Tax Liability: only
1%, 2.5% as against 5% or
18% for others
3. High Liquidity: Since lessor
tax outgo more cash in hand
DEMERITS
1. Limited business territory:
Sales to other states not
possible
2. No credit of Input Tax:
resulting in price distortion,
cascading, loss of business
to scheme holders.
3. No Collection of Tax:
Taxpayer cannot pass tax
burden to customer under
the Invoice.
4. E Commerce Supplier: is not
covered
CA Piyali Parashari

7. GST on SERVICES
The important services sectors from the government revenue
point of view are banking, insurance, telecom, construction,
business support and transportation, hotels.
The bulk of the services will be taxed at 18 per cent. The sector is
currently taxed at 15 per cent under Service Tax, so the GST
regime will increase tax incidence.
The main challenge in the GST era is multiple registration in each
state where they are providing service
There is a technological challenge of helping small enterprises in
the services sector to electronically file their return. This would
require technical support through tax return helpers.
CA Piyali Parashari

8. Small Business selling SERVICES
Registration is compulsory
if sales of services exceeds `
20 lakhs in a financial year
No other thresh hold
limit is available as in
case of suppliers of
goods
If taxpayer is an Agent of a
Supplier he must be
compulsorily registered (eg
Commission Agents selling
goods on behalf of a supplier)
They cover the Travel Agents, Consultants, Advertisers, Cable
Operators, Clubs, Beauty Parlors, Architect, Consulting
engineers, courier, commercial Coaching centers, cleaning
services, security services, tailoring…………….
Under GST, transfer of goods
from principal to agent
would amount to supply and
would attract GST. CA Piyali Parashari

9. E Commerce Business
No thresh hold for
GST registration.
Registration is
compulsory
No benefits under
Composition
Scheme
Multiple
registration in each
State of operation
Tax Collection at Source
by the Market Operator
(eg by Amazon)
Online return filing.. 3
returns each month and
1 annual return. (Total 37
returns)
CA Piyali Parashari

10. Compulsory Registration
If you meet any of the conditions listed below, you should obtain GST
registration within 30 days
1. Your turnover in a
financial year exceeds `
20lakhs
Your turnover should
include aggregate value
of all taxable supplies,
exempt supplies, export
of goods and/or services
and inter-state supplies
of a person having the
same PAN
If your turnover includes
supply of only those
goods/services which
are exempt under GST,
this clause does not
apply
CA Piyali Parashari

11. Compulsory Registration
2. Every person who is registered under an earlier law will take registration
under GST
3. Anyone who makes inter-state supply of goods and/or services
4. Casual taxable person
5. Non-Resident taxable person
6. Input service distributor
7. E-commerce operator or aggregator
8. Person who supplies via e-commerce aggregator
9.Person supplying online information and database access or retrieval
services from a place outside India to a person in India, other than a registered
taxable person
10. Agents of a supplier
11. Those paying tax under reverse charge mechanism
CA Piyali Parashari

12. Concluding Suggestions
Some of the key points that should be kept in mind are:
1. Get your GST enrolment done on time.
2. Plan your logistics and warehousing requirement carefully.
3. Adopt such platforms, technologies which will enable your
business to be GST compliant.
4. Conduct an Impact Analysis with respect to existing rates for your
industry and State and GST rates.
5. Consider the CENVAT Credit that can be carried forward as Input
Tax Credit.
CA Piyali Parashari

13. Concluding Suggestions
COMPLIANCE RATING UNDER GST
GST brings transparency to the entire process by way of compliance
ratings. All registered taxpayers will be publicly rated according to
how well — or how poorly — they comply with GST regulations.
Dealers will not want to do business with a seller who may cause
problems with the Input Tax Credit cycle, thus costing them money.
B2B DEALERS
Businesses registered under GST normal route will always try to deal
with others registered dealers so that they can claim Input Tax Credit
seamlessly. Any break in the chain due to Composition Schemes and
exemptions may lead to a price escalations and distortions. Hence
unregistered dealers and Composition Scheme dealers may see their
business slow down.
CA Piyali Parashari

14. Thank You
For further details please contact
CA Piyali Parashari
CA Piyali Parashari