GST is a mixed bag for small scale businesses in the short term, but there are positive implications expected from the goods and services tax in the longer run. The SME sector contributes to nearly 70% of employment and 40% of export which forms a major proportion of the GDP of India.
There are millions of small businesses running in every nook and corner of the country which has changed their business approach after the implementation of GST. The GST council keeps updating the gst rate list and has ensured that small business owners don’t face much trouble and can utilise the new tax regime to their benefits.
Specifically for small businesses who employ karigars for carrying out different work, there are some important things to consider.
GST Rates For Karigars
For a business employing labour for services, a GST rate of 18% is to be paid if the worker is not an employee and the salary is paid. No GST is charged if the karigar is working as an employee in the business.
This regulation applies to all organisations, regardless of whether they are small, medium or large scale. Labourers are service providers, and GST is applicable since they fall under the ambit of supply.
Rules Of GST Registration
To ensure compliance relief to small businesses that employ karigars, the government has fixed an annual turnover limit of Rs. 40 Lacs. The limit is Rs. 20 Lacs for enterprises based in North-Eastern states. Businesses with a turnover less than the setup limit are not required to register under GST.
However, if your business involves interstate movement of goods, then GST registration is mandatory. This step saves small ventures from tedious compliance issues and an opportunity to focus on the expansion of the business.
The composition scheme gst provides relief to small businesses with limited turnover. The benefits include reduced compliance and paperwork, along with less tax liability. Registered companies generally have to file 3 monthly GST returns and one annual return, but those enrolled under composition scheme merely have to file one quarterly and one annual return.
The tax liability is also reduced as the manufacturers of goods have to pay tax at a fixed rate of 1-6% of the turnover. If you have a manufacturing business with a turnover below 1.5 crores, this scheme is applicable, and you can reap the benefits.
GST Return Forms For Small Businesses
Filing returns can be a tedious task, but the guidelines stated by the GST council have made tax filing more manageable, and every small business can adopt it with simple steps.
Multiple GST return forms have to be submitted to the tax authority, and thus business owners need to understand which ones are relevant to them. Below is the list of the basic forms that every small business should file:
- GSTR-1 (10th of next month): The form contains details like the outward supply of good and services. It is appointed for businesses with turnover more than Rs. 1.5 crores in the previous year.
- GSTR-2 (15th of next month): The form should contain the details regarding the inward supply of good and services.
- GSTR-9 (31st of next financial year): This is the annual return form.
- GSTR-3 (20th of next month): The form should contain the details about the taxes paid for the month after the finalisation of outward and inward supplies.
- GSTR-3b (20th of next month): The form is used to declare tax liabilities for a fixed period.
A small business which had a turnover of less than Rs. 1.5 crores in the previous year should file GSTR-1 quarterly.
The GST has provided a relief to maintain the bulky logistics and distribution network which was required for minimising the state-level taxes. With the new system in place, even small businesses get a chance to expand to a national level with minimum investment.
It has opened up different channels for small businesses to supply goods and services to distant customers and create a strong client base leading to growth and expansion.
GST is a great accomplishment for India and has open the growth channels for small businesses to expand and make a national-level impact. Entrepreneurs must work hand-in-hand with authorities for better tax compliance and reap the benefits of the advanced taxation system.