Tips to Support SMEs in Growing Business and Letting Prepared to New Tax Regime Transition
The Micro, Small and Medium Enterprises (SMEs) sector in India has been playing a vital role in the growth of the country for decades. As per the SME Chamber of India, the sector provides 45 percent of the industrial output, 40% of exports, employment to 42 million Indians, and on an average one million jobs every year along with the production of more than 8000 quality products for the Indian and the international markets. And the GST implementation has turned out as a game-changer for the sector. In the long term, it will change a lot in the Indian economy from the reduction in prices to the costs of operations. But there is an important question that can only be answered considering the current situation of the Indian SMEs. if they can manage the transition to a new tax system, the developed behavioral change will pave the way for us to do business later as a country.
As the experts mentioned, technology wize- only around 50 percent of the sector can comply with the GST rules. Also, the unavailability of an adequate workforce is one of the major issues of the sector and needs to be resolved before the tax system in India transit to a new tax regime. It would require dedicated personnel to deal with vendors and suppliers and ensure timely payments and invoicing of transactions made in the business. Deep observation of such issues could help in providing businesses with appropriate solutions. However, we have listed below a few expert tips which would help SMEs in making them getting ready for any transition to a new tax regime.
Tip 1: Estimate your ITC that it’s Everything for You
Above said is the truth for the SMEs that’s why they require to understand rules and regulations associated with Input Tax Credit (ITC). in the GST tax regime, the availability of ITC helps in evaluating the cost of compliance and the competitiveness of a business. With the associated laws, one can claim for ITC on expenses made for expansion of business such as marketing expenditure, transport costs, etc. That’s how being aware of the laws associated with ITC can help SMEs not only in claiming ITC but also in lowering down the operation costs and increasing profit margin. Thus, the ITC plays an important role in the estimation of your working capital and enforce SMEs to make sure good compliance.
Tip 2: Keep a Good Record of Invoices and Transaction Details
One can claim for ITC only when there is no discrepancy in the invoices of the seller and the buyer, also the same should be followed with the return filing and tax payments made by the supplier at the proper interval of time. Therefore, the SMEs should keep a disciplined record of invoices and transaction details during the whole supply chain. While the timely tax filing and payments come as secondary for the SMEs and others deal with.
Once the businesses started complying with the GST they have to provide all transaction details likewise the invoices of the customers should match with the suppliers' invoices. And only in case when reconciliation is done, one can claim for the valid ITC. Consequently, the authorities can easily track false ITC claims but for this, the SMEs have to be aware of the technological knowledge of ITC claims and with supplier's virtue like trustworthy and GST compliant. Any discrepancy will be populated and both have to accept it and further get reconciled to claim ITC.
Tip 3: Figure out cash troubles early and stay debt-free
The continuation of ITC claims depends on numerous factors. There are chances that SMEs might encounter some cash crunches meanwhile adjusting the supply chain to the new tax regime and have entered it. The businesses with insufficient cash lead to an increase in lending money, but these situations can easily be managed if the SMEs stayed ready for such troubles in advance and take corrective measures to deal with the situation of transition to a new tax regime.
Tip 4: Discard manual book-keeping
With the introduction of GST, all the filling related works under GST is done digitally on the GSTN portal. And it is the only platform to perform to upload invoices and all other GST-related tasks. Earlier, it has already been clear that how important is to match invoices at both ends to claim for ITC and in the case of importing manual data to the online portal there are chances to make errors easily. So, it’s a better option to use virtual records and accounts to transfer data easily and without any errors. However, for this, the staff should have safe hands-on using virtual records and accounts for bookkeeping and the SMEs can invest in providing basic training for switching from the manual approach of handling books to digital or virtual accounts.
Tip 5: Make a Wiser Selection of GST Compliant Software
However, the government gives aids of filing for tax returns on the GSTN portal directly. But in the case of the taxpayer is not well-versed with the forms and technology being used on the portal then it would be a better approach to opt for a software that complied with GST and let you file return easily and not making any mistakes while filing returns and uploading important data. It is to be noted that a business has to file around 37 return in a year (three per month and an annual return), and man-made errors tend to increase the cost of the process.
Note: Currently, the Indian market is filled with numerous software for filing GST. Among them, Gen GST Billing Software for small business is a highly popular and reliable product that gives you the aid of complete GSTN e-filing with a few clicks without making any errors.
So these are a few tips which will help the SMEs in reducing prices and costs of operations. Also, the SMEs would be prepared to switch to a new tax regime if any transition takes place.
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