GST:Micro and Small Business could under report income initially

By Registrationwala

20th April 2017

 

India is on it’s countdown since nationwide GST has it’s roll out day on July 1. GST will have it’s on micro and small enterprises as they will under-report their yearly income. Firms have a plan in bracket of Rs 20-50 lakh so that a low tax rate of 1-2 per cent applies to them.

Firm will have with increase in compliance under GST. This will have its impact in the long run by providing them access to cheaper capital and lower input costs. There will impact in the short term, the switch from the unorganised to organised sector will make them less competitive.

According to GST, will be in the Rs 20-50 lakh bracket. There has report made by the analysts in number of businesses with turnover above Rs 50 lakh could resort to under-reporting their income to pay lower taxes.

In some cases small business may try to evade the system. These are mainly with the   family owned business worth around Rs 90 lakh annual income. The may be pass off as two separate businesses owned by family members, each worth Rs 45 lakh, just to pay lower taxes under the GST.

GST will lead to improvement in upstream compliance which will decline number of under-reporting small business. There has been estimation of 51 million MSME businesses according to the latest annual report (2015-16) of the ministry of micro, small, and medium enterprises. There have been possibility 117 million people getting with   combined fixed asset value of nearly Rs 15 lakh Crore. Around 55% of small Business could be unorganised sector. Smaller Businesses will have access to cheaper capital as well as legal recourse in case of disputes.

 

GST:Micro and Small Business could under report income initially

2017-04-20