Union Budget Review 2012-2013 on SME, IT and GST

In this Union Budget of 2012-13 no significant reforms are seen and the review is mixed. The deficit of 5.1% for 2013 is disappointing. The overall budget for the small and medium IT sector is not encouraging apart from some promises on GST, which affects the SME, IT and eCommerce.

The Service Tax has been raised from 10% to12%, which will definitely hit the demand for domestic software services and effect small and medium local IT players. The rise in the technology spending towards Unique identification authority of India (Aadhaar project) , LPG transparency portal is good news for IT but no special attention towards transparency inallocation of such project to smaller IT service providers. The budget is silent on the ambiguity on taxation on software product and services.

Overall rise in excise duty from 10% to 12% except textile may marginally benefit the textile industry but overall has dampen the spirits of the end consumer.

The India Opportunities Venture Fund of 5000 cr. sponsored by government through SIDBI will boost the MSME and is good news for start-ups and entrepreneurs.

The increase in funds (doubled from 1000 to2,500 cr. ) for National Skill Development Corporation will benefit the SME to employ more skilled labour. The generalising of income exemption and raising to Rs.2,00,000/- is a good move in this budget.

The introduction of GST by August 2012 will boost overall performance in the SME sector. The setting up of GST dispute settlement authority is a good move.  The common GST Network (GSTN) setup for filing returns will streamline tax functions from SME.  The multiple taxpoints will be eliminated and uniformity of tax will give SME a better workspace. The compliance process in the complete supply chain will become simpler. Uniformity across the country will help Chain stores across different statesand also simplify eCommerce and eRetailing. It is good news for business software providers who will do away with the nightmare of dealing with various compliances and statutory needs in different part of the country.

Contributor – Vineet

The benefits of GST for SME

Here we will discuss about the benefits of GST for SME. Goods procured from within the state oroutside the state will be eligible for tax credit. It allow trader to offergoods at a lesser cost.
Service industry can take tax credit of taxon goods purchased and set off against tax payable on services.
Uniformity in taxing system across statewill simplify the tax compliance issues.
Manyambiguities in levied tax on service and goods will be addressed.
SGST Threshold of annual turnover isproposed to be 10 Lac and CGST threshold for annual turnover is proposed at 1.5Cr and is in the interest of SME

The idea behind the GST is to have aliberal and simplified taxing system and encourage to pay taxes. The tax burdenwill be evenly distributed in the supply chain and for regular tax payers itwill be less complicated.
Lot of ground work in each state is stillrequired for which the centre agrees to pay for the costs. It is unlikely to beintroduced in this session.

Contributor – Vineet

Impact of GST on SME and small IT companies

Impact of GST on SME and small IT companies

Here, in this article, we will talk about the Know about the impact of GST on SME and small IT companies in India. Certain reforms are absolutely necessary for India to keep up to the Global economic reforms and trends. GST is one of such topic which is looked upon with great hope.

From a SME point of view it has never been addressed before:

Radical reforms in the taxation are absolutely necessary for SME throughout the country. It is deterrent to growth and expensive to comply with complex statutory obligations in the present structure.

A considerable time and energy of management in SME is consumed in resolving and complying with tax regime.  GST hopefully will eliminate all types of taxes applicable related to goods and services, which will simplify business processes.

Multiple taxes on the same product will not be levied as credit for tax paid will be streamlined. This will reduce costs in the production process and overall cost of goods and services for the end user.
Some key benefits for SME aspiring to go national will face little or no problem as tax rates will be uniform nationwide and standard pricing can be maintained throughout the country and of course saving from the nightmare of state wise statutory compliance.

Enormous confusions/ambiguityin interpretation of software as taxable through service tax route or sales taxroute will be addressed for small IT firms into domestic sales and services.

It is unlikely that amendment bill on GST will be tabled in this session of Parliament. Further the proposal to introduce dual GST one for state (SGST) another for center (CGST)and over and above that different percentage (20%) for goods and different percentage (16%) for services will only complicate for SME. For IT software and service providers the ambiguity will continue to remain in identifying a given IT activity as goods or as service.

We all are looking forward to concrete decisions on GST in the coming budget. It will reduce lot of taxation related overheads in terms of time and money in the supply chainand ultimately benefit the SME and the common man/end user. It is bound to stimulate growth and strengthen the economy.

Contributor – Vineet