With the recent introduction of GST tax laws in India, there has been a buzz around the impact it will have on Businesses.
Mr. Tarun Malaviya, CEO and Co-founder, Mithi Software Technologies (the maker of products such as Vaultastic, SkyConnect, ClrStream, ConnectXf etc.), features in Swarajya Magazine. He shares his insights on the positive impact that GST can bring to SMEs in India.
Excerpts from the article:
One of the core factors eroding the margins for SMEs and slowing their growth has been low, slow and no payments.
One of the positive outcomes of the goods and services tax (GST) has been faster payment of dues to small and medium-sized enterprises (SMEs) – something that many directives and pieces of legislation previously could not achieve.
With the GST coming in, input credits have to be reversed if the seller has not been paid within six months. Additionally, an interest penalty is levied on the claimed credit for that period. To keep the GST record clean, and not lose additional money, buyers are disincentivised against delaying payments.
With single point, digital and monthly reconciliations of transactions for claiming input credits, it is hard to game the system.
This is a big positive for the SMEs, resulting in improved cash flows and lower cost of doing business. It also closes another source of free cash for the bullies among the buyers. Things could be even better if the time frame for reversing credits due to non-payment was made two months with higher penalties while reducing the TDS rates to around 5 per cent for SMEs with revenues up to Rs 500 crore. Also, a faster movement towards unification of the rates to one, single rate would reduce the chances of disputes on tax claims.
To learn and understand more on GST, you can read the full article here.