Why Are 89% of Small Businesses Struggling to Cope with GST Compliance?
Small and medium-sized businesses are considered the backbone of the economy in terms of GDP, export, employment generation, and inclusive growth; need to be nurtured equally to maintain their health and growth. 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 now no longer be capable of generating a digital permit (e-way bill) for goods transportation, if they have defaulted on submitting return forms for 2 consecutive tax periods.
The National Informatics Centre, which runs the portal for producing e-way bills, stated that it’ll set off this option for all corporations from December 1, no matter what their turnover is. This compliance rule has been enforced for larger businesses from October 15.
It’s been over three years since GST registration online was implemented in the country, but small and medium businesses are still struggling to prepare for the substantial increase in the compliance. A large number of GST returns that need to be filed is yet another factor that contributes to the hardships faced by the business owners. While some businesses are successfully keeping pace with technology, others still need to go a long way. When a businessman does not have hands-on experience using IT solutions, it would be a little unfair to expect an error-less return filing. The heavy costs associated with the IT infrastructure adds to the challenges.
Infrastructure bottlenecks; absence of formalization; seamless technology adoption; potential building; back-and-forth linkages; loss of getting right of entry to credit score and capital threat; and the perennial trouble of delayed payments are among other challenges faced.
Although the government authorities had so far restricted compliance enforcement measures to the large organizations, the restriction of the e-way bill shows that after approximately 3.5 years of rolling out the Goods and Service 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 ambit.
While the new models of tax compliance are useful for the digitally active ones, many SMEs will need to enhance their technical ability this year to be on the right side of law and ensure a sustainable business.