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India’s New GST Compliance Rules For Small Business

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In another move to smoothen the tax process for businesses, the Central Board of Indirect Taxes and Customs (CBIC) has taken up some steps. The steps are taken to avoid the activity of fake invoicing and help businesses adopt the rules with ease.

In the past, India suffered economic losses due to the failure of tax payments on time. And then the Covid-19 pandemic made the situation worse. The economy saw a massive breakdown, and it was high time for India to update the existing tax rules. 

# Who is it For?

The new GST compliance rules are for MSMEs, which stands for Micro, Small, and Medium Enterprises. They are a significant contributor to the GDP of the country, promoting inclusive growth. They also help establish better exports and employment opportunities, benefitting the country. With the introduction of new tax reforms, their contribution to the economy will get a boost. And will also ease down the steps of filing tax returns. 

# Why are these Rules Introduced?

These rules are specifically introduced for MSMEs, as stated above. They contribute widely to the overall economy of the country. That’s why the government wants to make sure these businesses are tax compliant and can do business with ease. It also is a move to kickstart the country’s net tax collection. 

Moreover, the rules will ensure better economic stability after the country gets a big blow due to the Covid-19 pandemic. While the tax enforcement laws have not stayed strict before, the government cannot ease down anymore. 

# What are the Common Problems Faced by MSMEs?

MSMEs being small enterprises, function with a limited amount of resources. Since the introduction of GST in 2017, MSMEs have faced issues while filing GST returns. The reasons being lack of knowledge towards the digital world and not being able to include the latest technologies into their business. Some businesses face problems with the tiresome tax and accounting processes, while some simply cannot afford to do so. 

The other reasons could be the constant struggles with the tax regime itself, such as the lack of formalization, delay in payments, etc. 

So now, what are these new GST compliances that businesses have to follow? Let’s discuss them one by one.

# India’s New GST Compliance Rules For Small Business

1. Introduction to E-Invoicing

E-invoicing or digital invoicing will be introduced to track down the business-to-business transactions information. Any fraudulent activity or mishap can be tracked down through the NIC portal.

For businesses with a turnover of Rs. 500 crore and Rs. 100 crore are liable to include e-invoicing from January 1. 

2. Micro Businesses to Pay 1% GST

Microbusinesses with a monthly turnover that exceeds INR 5 million will have to pay at least 1% GST in cash, as per the latest rule 86B by the Central Board of Indirect Taxes and Customs (CBIC). 

The input tax credit for such businesses is restricted to 99% in the electronic credit ledger. They cannot discharge more than 99% of the tax credits. 

3. Filing GSTR-1 

A new restriction is introduced in filing GSTR-1 for small businesses. While filing GSTR-1 quarterly, if a business hasn’t filed GSTR-3B for the previous tax period, then GSTR-1 will not be allowed. They will be denied to submit GSTR-1 for the current quarter until they don’t file the GSTR-3B for the previous tax period.

4. No E-Way Bill Generation For Some Micro Corporations

Under the Goods and Services Tax (GST), micro-businesses with a turnover of less than INR 5 crore will not be allowed to generate e-way bills (digital permits) for the transportation of their goods. All of this if they were found defaulted in submitting tax return forms for two consecutive tax periods. 

5. No Fraudulent GST Registrations

With the new GST compliance rules, fraudulent GST registrations will be put to an end. The verification can either be done by physically verifying the business’ location or by verifying the authentication of the Aadhar numbers through Unique ID.

If any organization is found to be violating this rule, their GST registration will be suspended, and in severe cases, will be permanently canceled. 

# Conclusion

New models for tax compliance are essential for the digitally run world and would help small businesses become more organized. From the restrictions in filing in GSTR-1 to the introduction of e-invoicing, the government is making sure to provide the best solutions to the problems faced by businesses. However, there’s still a long way to go as most of the small businesses are not quite adaptable to change quickly. The introduction of these rules will ensure smooth transactions that are safe and free from scams. The steps taken will establish good tax behavior and a proper management model amongst the businesses. And this will successfully benefit the business and the nation as a whole. 

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