GST is a quintessential GD topic this season. For a topic like ‘Is it True that GST has impacted small traders’ the key things you must know are about:
- Small traders or businesses
- Relationship between the two
- Pros and Cons of GST w.r.t small traders
Some important pointers to keep in mind in the Group Discussion (GD) round during an MBA selection process.
What is GST (Goods and Services Tax)?
- Type of Tax
It is a type of indirect tax
- Important Facts and Dates
GST was introduced as part of the Constitution Bill (one hundred twenty second amendment), 2016. It was passed by Rajya Sabha on 3rd August 2016 and Lok Sabha on 8th August 2016. The GST was implemented started 1st July 2017
As defined in Investopedia, ‘The goods and services tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption. The GST is paid by consumers, but it is remitted to the government by the businesses selling the goods and services. In effect, GST provides revenue for the government.’
- Features of GST
o Eliminates double taxation on goods (tax on tax)
o Measure to reduce the overall cost of goods and reduce inflation
o Administered by both State and Central governments
o Requires online registration only
What is a small-scale business or small traders?
- A business idea that requires a capital of anywhere between ten lakhs to two crore rupees can be considered a small business or enterprise (as per the Ministry of Law and Justice, The Micro, Small and Medium Enterprises Development Act, 2006)
- A small business usually has between 10 to 50 employees
- There are more than fifty million small and medium scaled business in India
- Some popular small-scaled businesses are:
- Food Delivery Center
- Event Organizing
- Tuition Center
- Departmental (Kirana) Store
How GST impacts the small traders/business owners
- GST is centralized, so the implementation rules are uniform across all states. This reduces the overhead cost of setting up a new business or in its expansion
- GST ensures transparency because it reduces number of indirect taxes levied on a particular good or service
- GST removes cascade taxation. It reduces overlapping and merges taxes levied on goods like Central taxes such as Excise duty, service tax, customs duty, etc. and State taxes such as luxury tax, VAT, and purchase tax etc. This makes the process simpler which is beneficial for smaller owners
- GST ensures dealing with a smaller number of tax authorities
- There will be an IGST i.e. a combined tax (CGST + SGST) which will be collected by the center only. Border and check-post taxes will be removed thus reducing the overall logistics cost of a good
- GST will make invoicing less complicated. Tax will be calculated on the final total instead of individual items. This provides tax incentives to small scaled businesses
- As the overall price of a commodity reduces, it elevates the consumption of the product in the market
- Process like registration, tax payments, tax refunds and tax returns are all online now. This ensures transparency and reduces compliance cost.
- Many small business owners may not be handy with online and electronic medium. The owners need to register for GST across all the states they do their businesses. This will obviously be challenging
- The tax returns need to be filled on a monthly basis and there around 36 returns to be filled in every fiscal year. Failure to filing these will lower the compliance rating of the business. A fee of INR 100 needs to be paid on failing to file a tax return on time
- The small business owners will need a tax expert and/or an accountant to maintain consistency while filing the returns on a monthly basis
- There is a lot of book-keeping involved
- The e-comm business owners need to register for GST under all states they deliver their products. Irrespective of the turnover, there is no exemption on them.
If you prepare on above points, cracking a GD will definitely be easy.
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