How GST is Beneficial and Effective for Small Businesses?

GST is Beneficial Small Businesses

If we have a close look at the number of businesses operating within the geographical boundaries of the country, then this digit will exceed sixty million. Out of these, a plurality of businesses belongs to the category of SME and MSME which includes, but is not limited to, traders and retailers. The area of expertise of this genre of commerce is production, trading and retailing. There is no denial of the reality that the implementation of GST would surely affect the overall functioning of these companies.

If you asses the current situation, then the small scale manufacturers—who are operating at an annual scale of less than INR 10 lac— are enjoying service tax exemptions under the current taxation scheme. One question which is boggling up the minds of every business owner, who is functioning at a smaller scale is, whether or not there will be GST exemption for small business in the new tax regime.

The good news over here is that the GST would bring a new dawn for the SME and MSME companies of the country. Apart from the GST exemption for small businesses, there are a host of other benefits that this new reform has to offer to the business owners of the country. Some of these aids are highlighted below.

Ease of performing business:

If businesses have to transport their goods from one state to another, then they have to go through a rigorous and tedious process of VAT registration and other inter-state taxes. The introduction of GST would surely act as a blessing for these businesses as it would centralize everything to foster uniformity within the system. With the implementation of this new structure brought in by GST, small business houses would save up all the time, money and effort of getting themselves registered under various domains. They just need to get them listed under GST, which would be applicable across the entire country, and no other headache pertaining to paperwork would be there.

Better Integration leading to the simplicity of operations:

As GST is government regulation, hence, all businesses will have to duly comply with that. In the present day scenario, all the various businesses have to adhere to different kinds of indirect tax regulations which ends up complicating the procedures to a great extent. It is expected that the GST exemption for small businesses will bring in reforms that will ease out the overall operations while providing simplified ways of operating business.

GST Exemption for Small Business:

In the present framework, it wasn’t mandatory for businesses with an annual turnover of less than INR 5 lakhs to have VAT registration and payment. The introduction of GST has changed the current picture to a vast magnitude. Once it comes into action, the GST exemption for small businesses would increase to INR 20 lakhs. This means that only those businesses which have an annual turnover of more than INR 20 lakhs will have to register for GST. In addition to all this, businesses earning revenues anywhere between INR 20 to 50 lakhs will have to pay GST at a subsidized rate— this is a part of the composition scheme.

An elucidation of threshold exemption limit:

In the present setting, service tax is exempted up to INR 10 lakhs. Once the GST regime is enforced, this limit would be enhanced to INR 20 lakhs across the country except for 11 states. In these states, the limit would be the same as the previous one i.e. 10 lakhs.

If you take a look deeper into the GST rule, then you will understand that businesses with revenues between INR 20 to 50 lakhs will have an alternative in which they can pay a composition amount under section 9 of the GST law. This would be at a flat rate devoid of demanding any input tax credits. Additionally, the need to maintain a detailed book of accounts and compliance would get reduced to a great extent.


The rates and other aspects of the law have been designed while keeping in mind the much prevalent concept of ‘Make in India’. Due to this, a lot of benefits along with GST exemption for small businesses and start-ups would be provided to them. Another major benefit of this is that it would bring all multiple taxes into one umbrella called GST. This would simplify processes and reduce paperwork to a great extent. All in all, small businesses can benefit a lot from the new GST regime.