The Impact of GST On Small And Medium Enterprises

Alok Kumar Agarwal Alankit decodes how small and medium enterprises have been affected post-GST reform.

The implementation of the Goods and Services Tax (GST) in July 2017 marked a seminal moment in the history of Indian taxation. This ambitious tax reform, designed to replace multiple indirect taxes imposed by both the central and state governments, has had a profound and far-reaching impact on the country’s fiscal landscape. With the intent to simplify the tax structure, ensure heightened compliance, and foster a unified market, GST has left an indelible mark on various sectors of the economy. However, it is the Small and Medium Enterprises (SMEs) sector that stands as the linchpin of the Indian economy, making their experience under GST a matter of crucial importance and expert examination. Let us take a look at how GST has affected small and medium enterprises and read the views of Alok Kumar Agarwal Alankit. 

Also Read: Alok Kumar Agarwal Sheds Light On The Qualities Of An Ideal Investment Portfolio

Benefits of GST for SMEs:

Streamlined Tax Compliance: One of the key benefits of GST for SMEs is streamlined tax compliance. Under the previous tax regime, SMEs had to navigate through multiple indirect taxes, resulting in complexity and increased compliance costs. However, GST has unified these taxes, simplifying the process for SMEs. SMEs now have a single registration and a unified tax return, reducing paperwork and making it easier to comply with tax regulations. This streamlined process allows SMEs to focus more on their core business activities rather than grappling with complex tax procedures.

Increased Competitiveness: GST has contributed to enhancing the competitiveness of SMEs. Before GST, SMEs often faced challenges in inter-state trade due to varying tax structures across states. GST has eliminated these barriers by providing a uniform tax structure throughout the country. This has enabled SMEs to expand their market reach, operate seamlessly across state boundaries, and benefit from a more level playing field. “GST has facilitated SMEs to tap into larger markets and establish stronger business relationships, ultimately driving their growth and competitiveness” shares Alok Kumar Agarwal Alankit.

Input Tax Credit: The introduction of the input tax credit is another significant advantage of GST for SMEs. Under the GST system, SMEs can claim input tax credits for the taxes paid on their purchases of goods and services. This allows them to offset their tax liabilities against the taxes already paid, effectively reducing their overall tax burden. By availing of the input tax credit, SMEs can lower their costs of production, making their products and services more competitive in the market. This financial relief helps SMEs improve their cash flow, invest in growth opportunities, and ultimately boost their profitability.

Challenges for SMEs:

  1. Technological Adaptation: One of the challenges faced by SMEs in the GST era is technological adaptation. GST compliance requires businesses to maintain proper digital records, generate e-invoices, and file returns online. For SMEs with limited resources and technological capabilities, adopting and implementing these digital processes can be a hurdle. It may require investments in new software, hardware, and training. The initial adjustment to these technical requirements can be daunting for SMEs, particularly those operating in remote areas with limited access to technology infrastructure. Addressing this challenge requires support in the form of training programs, simplified software solutions, and affordable digital infrastructure.
  2. Compliance and Procedural Complexity: While GST aims to simplify the tax regime, there are still compliance and procedural complexities that can pose challenges for SMEs. The GST framework includes various tax rates, exemptions, and classification requirements that SMEs must navigate. Understanding these complexities, maintaining accurate records, and ensuring timely compliance can be demanding for SMEs, especially those with limited accounting and legal resources. Alok Kumar Agarwal Alankit says, “Non-compliance can lead to penalties and legal implications. Simplification of GST processes, providing easily accessible guidance, and offering compliance assistance can help SMEs overcome these challenges and ensure smoother compliance.” 

Cash Flow Impact: For some SMEs, the transition to GST may have initially impacted their cash flow. Under the previous tax regime, SMEs often paid taxes on a quarterly or annual basis. However, GST requires regular tax payments, increasing the frequency of cash outflows. This shift in payment patterns can strain the cash flow of SMEs, especially GST has had its fair share of benefits and challenges for SMEs. However, with the right support, training, and simplified processes, SMEs can conquer these challenges and keep shining. GST might not be an easy change, but it’s a step towards a better business landscape for SMEs.


About The Author


Mr. Alok Kumar Agarwal, the former chairman of Alankit Limited, has soared the Alankit Company by venturing into dynamic business spaces and developing efficient financial solutions. Alok Kumar Agarwal’s passion, dedication, and strategic business acumen have acted as the catalyst for a phenomenal transformation of the Alankit Group. His philosophy has been a blend of fiscal prudence and continuous innovation for the sustainable growth of the Alankit Company. His entrepreneurial skills and deep industry expertise have underpinned the success of Alankit Group.

Alok Kumar Agarwal of Alankit holds a Bachelor’s Degree in Commerce and is a fellow member of the Institute of Chartered Accountants of India and a Certified Financial Consultant conferred by the Institute of Financial Consultants. He has successfully completed a training programme on Health Insurance for CEOs/CAOs of TPA at the Administrative Staff College of India, Hyderabad. He has also qualified for NCFM- Derivatives, DP Operations, Capital Market, and Mutual Fund segments. With this proficiency, he has successfully led the Alankit Group to newer heights.

i

Related Posts

Tax Planning and its Benefits

Tax Planning and its Benefits

Timely and disciplined tax planning can help tremendously! – Alok Kumar Agarwal Tax planning is a crucial aspect of personal finance that involves the strategic management of one’s financial affairs to minimize tax liabilities and maximize savings. By utilizing legal...

AI Chatbots making customer service functions easier

AI Chatbots making customer service functions easier

AI in customer service ushers in an era of customer-first approach. Alok Kumar Agarwal of Alankit shares how customer service stands to gain immensely from AI chatbots! AI technology has been making heads turn since Chat GPT was released last November. People have...