GST is breaking down barriers created by the older, complicated tax structures, paving the way for a unified marketplace and is making it easier to conduct business. While large corporates have been the prime driver and beneficiary of economic growth so far, the next stage of economic growth will need to come from a different source: the small and medium businesses (SMBs).
The Game Changer SMBs:
SMBs contribute nearly 45% of India’s GDP: three times as much as corporate India’s contribution.
The sector is growing at over 11% annually, most transactions among SMBs are still in cash.
A large percentage of SMBs has traditionally operated below the tax ceiling.
More importantly, technology penetration among SMBs remains very low: more than 65% are estimated to be offline.
Businesses under GST Network (GSTN):
Businesses must connect to the GST Network (GSTN) to file taxes.
There are about six million registered users with the GSTN. This number is expected to increase by another 50% post-GST implementation, bringing an even larger number of businesses under the tax ambit for the first time.
Benefits of GST for SMBs:
This technology-enabled transition to GST has the potential to provide a major push to the economy.
The digital enablement of Indian SMBs can lead to more than $1trillion in additional contribution to the GDP by 2020. And this added growth will lead to creation of millions of additional jobs across all levels and geographies.
The long-term benefits of technology adoption for SMBs and traders are undeniable.
One such benefit SMBs can avail by being GST-compliant is improved credit sourcing.
For most small businesses, securing a loan from a financial institution can often prove to be a challenge.
Compliance to a transparent GST regime can be a blessing for SMBs, as it will facilitate in digitally organising their financial records, which can lead to easier and cheaper credit sourcing.
Access to easy credit can be a game changer for SMBs.
It will make them more competitive in the market — and open up possibilities for faster business growth.