The introduction of the Goods and Services Tax (GST) in India was a landmark moment for the country’s economy. The GST replaced a complex system of indirect taxes that were levied by the central and state governments, and aimed to streamline and simplify the taxation process. The Goods and Services Tax (GST) is a unified indirect tax system that was implemented in India on July 1, 2017, to replace various taxes like VAT, Service Tax, Excise Duty, and others. While the GST has brought many benefits to Indian businesses, it has also created some challenges.
Finsmart Accounting – trusted globally for bookkeeping services in India – created this blog to help young business owners understand the true impact of GST and navigate the complex world of GST to manage books efficiently. This guide will explore the impact of GST on Indian businesses and how outsourcing can help them navigate these challenges.
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The Impact of GST on Indian Businesses
The introduction of the GST has had a significant impact on Indian businesses. Some of the key benefits of GST include the reduction of multiple taxes and the simplification of the taxation process. However, there have also been some challenges that businesses have had to face, such as:
1. Increased Compliance:
GST has increased the compliance burden for businesses in India, as it requires them to maintain detailed records and file regular returns. Previously, businesses had to file separate returns for each tax, but now they need to file a single return for all taxes. This has led to an increase in the time and resources required for compliance, especially for small and medium-sized businesses.
2. Increased Cost of Goods and Services:
Under the GST regime, businesses cannot claim input tax credit for goods and services that are not used for business purposes. This has resulted in an increase in the cost of goods and services for businesses, as they are unable to pass on the tax burden to customers. Additionally, the GST rates for some goods and services have also increased, leading to a further increase in the cost.
3. Cash Flow Challenges:
With the introduction of GST, businesses have to pay the tax on time, which has impacted their cash flow. Moreover, businesses with a large amount of input credit may face challenges in claiming the refund.
4. Tax Rates:
The tax rates under GST are higher in some cases, which can increase the tax liability for businesses. No wonder, there was hue and cry from SMEs when the GST tax regime was announced.
5. Positive Impact on Organized Sector:
GST has had a positive impact on the organized sector in India. Due to the implementation of GST, many unorganized businesses have come under the tax net, resulting in a level playing field for organized businesses. This has also led to increased transparency and accountability in the system.
6. Increased Efficiency:
GST has led to increased efficiency in the taxation system, as it has simplified the tax structure and reduced the number of tax rates. This has resulted in a reduction in the overall tax burden for businesses. Additionally, the implementation of GST has also led to the removal of check posts, resulting in a reduction in the time taken for transportation and logistics.
Businesses in India need to adapt to the new tax regime and explore options like outsourcing to manage their compliance and reduce the burden of GST.
Read on to discover how accounting outsourcing in India can help organizations dodge tax delays, penalties, and accounting mess.
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How Outsourcing Can Help
GST compliance is a crucial aspect of running a business in India. With the introduction of GST, the compliance requirements have become more complex, making it challenging for businesses to keep up with the changes. Many businesses struggle to manage their GST compliance in-house, and as a result, face penalties and legal consequences.
Outsourcing GST compliance to a specialized accounting firm can help businesses streamline their compliance process and avoid these penalties.
Outsourcing to a professional accounting firm can provide businesses with access to expertise and knowledge on GST regulations, compliance, and filing requirements. A specialized firm has experts who are up-to-date with the latest GST regulations and can ensure that businesses stay compliant. By outsourcing, businesses can free up their internal resources to focus on their core competencies, leading to increased efficiency and profitability.
Outsourcing can be a cost-effective solution for businesses as it eliminates the need for them to invest in expensive accounting software and infrastructure.Outsourcing GST compliance also provides businesses with greater flexibility in managing their compliance requirements. They can scale up or down their outsourcing requirements based on their business needs, without worrying about the cost of maintaining an in-house team. Additionally, outsourcing can help businesses avoid the cost of training and upskilling their employees to manage GST compliance, as it requires specialized knowledge and expertise
3. Improved Cash Flow:
Outsourcing can help businesses manage their cash flow by providing timely and accurate reporting and ensuring that taxes are paid on time.
4. Focus on Core Business:
Outsourcing allows businesses to focus on their core competencies and activities, rather than spending time on non-core activities like accounting and taxation. Outsourcing GST compliance can offer businesses greater transparency and visibility into their compliance process. A specialized accounting firm provides regular updates and reports on the compliance status, which helps businesses stay informed and make better decisions.
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Finsmart Accounting with its 15 years of outsourced accounting is a one-stop solution for all accounting, taxation, and payroll needs for growing business enterprises. Our customer-centric service models, domain expertise, and use of the latest tools & technology have truly helped us to establish ourselves as ‘Trusted FinOps Partner’.
Still, got questions to ask? Send them at email@example.com and get a quick reply from top accounting experts. Or check out these valuable resources:
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Shalaka Joshi is the founder of Finsmart Accounting and operates in the capacity of Director. A Chartered Accountant passionate about outsourcing and problem-solving, Shalaka has more than 20 years of experience in the field of accounting, payroll and MIS reports.