Small and medium-sized businesses are considered the backbone of the economy, contributing significantly to GDP, exports, employment generation, and inclusive growth. To maintain their health and development, they need to be nurtured equally. However, SMEs might soon feel the increased burden of compliance under the Goods and Services Tax.
From December, corporations with sales below Rs 5 crore—described as micro corporations—will no longer be able to generate a digital permit (e-way bill) for goods transportation if they have defaulted on submitting return forms for two consecutive tax periods.
The National Informatics Centre, which operates the portal for generating e-way bills, stated that it will activate this option for all corporates from December 1, regardless of their turnover. This compliance rule has been enforced for larger businesses from October 15 to [date].
It has been over three years since the online GST registration was implemented in the country. However, small and medium-sized businesses are still struggling to prepare for the substantial increase in compliance. A large number of GST returns that need to be filed is yet another factor that contributes to the hardships faced by business owners. While some businesses are successfully keeping pace with technology, others still have a long way to go. When a businessman does not have hands-on experience using IT solutions, it would be a little unfair to expect an error-free return filing. The heavy costs associated with the IT infrastructure add to the challenges.
Infrastructure bottlenecks, the absence of formalization, the need for seamless technology adoption, potential building, back-and-forth linkages, the loss of access to credit and capital, and the perennial issue of delayed payments are among the other challenges faced.
Although government authorities have so far restricted compliance enforcement measures to large organizations, the restriction of the e-way bill shows that, after approximately 3.5 years of rolling out the Goods and Services Tax, it’s far from being a perfect system and will continue to evolve. Small businesses have so far enjoyed certain compliance relaxations during the GST transition period. However, the revenue loss to the Government during COVID has pressured it to widen the compliance ambitthere’s there’s a plan to make digital invoicing—the system of real-time validation of business-to-business transaction information on the NIC portal—that is presently relevant to businesses with Rs 500 crore income and to the ones with Rs 100 crore incoJanuary January 1, obligatory for all from April.
These moves are significant. On the one hand, while it will increase the compliance burden, tax evasion skews the very nature of business, making defaulting companies more price-competitive than companies that contribute to the exchequer.
