Why are Small Businesses struggling to cope with GST Compliance?

Why are Small Businesses struggling to cope with GST Compliance?. It is difficult to run a small business. Small businesses struggle to be GST compliant because they have fewer resources (money, time, and personnel). While the government is working to make things easier, GST filing service providers are likely to be the best option for businesses.
The GST Council has established rules for all GST registered businesses to follow regarding record keeping, invoices, reporting purchases and sales, paying taxes, and filing returns. These rules and regulations must be followed by everyone. In other words, GST compliance is defined as adhering to GST laws and regulations. Non-compliance with GST regulations can result in significant fines and penalties being imposed on a business.
Small and medium-sized businesses are regarded as the backbone of the Indian economy, contributing significantly to GDP, export, job creation, and inclusive growth. They may believe that the burden of compliance has increased significantly under GST. The post-independence Goods and Services Tax was the most significant tax reform since the country's independence. There are some difficulties for both businesses and consumers. Here, are some of the ways on  how small businesses can cope with GST compliance.
What is GST Compliance Rating?
The GST compliance rating is a score assigned to a business by the government that reflects the company's compliance consistency. Every taxable entity under GST, regardless of its nature, size, or turnover, will be assigned a GST compliance rating.
If buyers want to claim input credit for their products, they must show all transactions in which they paid GST to their suppliers, according to the law. The higher a supplier's compliance score, the better the buyer's chances of reclaiming input tax credit.
Checklist for GST Compliance
Although GST compliance rules are updated on a regular basis and are based on government standards, the GST compliance checklist can be divided into three categories:

Registration observance

Compliance with tax invoices

Compliance with tax filing requirements

Many other requirements differ depending on the type of business. Contact a GST specialist to learn more about them in depth.
Difficulties encountered since the implementation of GST
1. Determining ITC on Closing Stock
The most significant difficulty that trade is facing during GST implementation is determining input tax credit of excise duty and VAT included in stock of raw materials, work in process, and finished goods as of 30.06.2017, which must be carried forward to GST as opening balance of input tax credit of CGST and SGST respectively. This is also important in terms of avoiding the anti-profiteering clause.
2. Identifying HSN codes
Determining HSN codes not only for goods or services supplied, but also for goods or services purchased from an unregistered supplier and subject to reverse charge taxation. The number of digits of the HSN code must then be specified on invoices.
3. Determining Tax Rates
Due to the multiple rates prescribed for goods or services, it becomes a little difficult for trade to arrive at an actual rate. Furthermore, the rates for goods or services purchased from an unregistered supplier on which tax must be paid on a reverse charge basis in order to raise a self-invoice must be defined.
4. Identifying the nature of transactions
It is critical to determine the correct nature of the transaction in order to charge and collect the correct tax. To avoid future litigation, CGST and SGST must be charged on intra-state transactions, and IGST must be charged on inter-state transactions.
Reasons why Small Businesses are struggling to cope with GST Compliance
Financial Restriction
It's no secret that small businesses don't have a significant amount of flexibility in their budget. Because of such financial constraints, new businesses frequently make the fatal mistake of cutting back on accounting resources.
Small businesses face financial restrictions, and as a result, they make the mistake of reducing accounting resources. A study found that nearly half of small businesses do not use the services of a bookkeeper or accountant. This is why most businesses struggle to maintain GST compliance. As a result, it is recommended that you hire a qualified bookkeeper if you manage a small business. If your budget does not permit it, consider hiring an accounting service provider to do the work for you.
Lack of Professional Expertise
Another important reason why small businesses fail to comply with GST regulations is a lack of professional expertise in tax matters. Small businesses have a difficult time finding one because they cannot afford to hire in-house people with the necessary skills. Furthermore, small businesses cannot afford to devote their attention to anything else because they are focused on actions that will help them scale up their operations. Compliance is essential, but it must not come at the expense of true business expansion.

It is also undeniably true that small businesses cannot afford to devote their time or energy to anything other than the core activities that allow them to grow.
Compliance is essential, but it cannot be achieved at the expense of genuine business growth. As a result, small businesses may prefer to use CCL's comprehensive GST services.

Not Having the Right Tools
The Indian government's GST compliance standard applies to all taxpayers in India. They can meet this demand by using the appropriate tool to create, update, and record invoices. Small businesses, on the other hand, may struggle to afford the necessary set of tools for this purpose, as GST compliance necessitates accurate and methodical transaction documentation, as well as strict adherence to the authority's deadlines. Furthermore, the GST return filing deadlines and the GST compliance schedule must be strictly followed.
Reluctance to Seek GST Advisory
Hiring a dependable GST consultant can help you avoid missing important deadlines and stay in compliance with all things GST. Because you may not have the funds or the need to hire a full-time GST compliance officer as a small business owner, using an external GST compliance service to handle it on your behalf can be extremely beneficial. Furthermore, such third-party GST compliance service providers are well-versed in industry-specific GST regulations. And regulations include all of the tools required to ensure complete compliance.
These were some of the major issues, but there are several others that plague small businesses, such as infrastructure bottlenecks, a lack of formalization, slow technology adoption, and the ever-present issue of cash flow.
How can small businesses manage GST compliance?
GST invoicing and billing- You can quickly generate GST invoices from your mobile or computer. With the built-in catalog or contacts, error-free invoices with the correct GST rate and computation can be created in seconds. Billing in multiple currencies is supported by the platform. You can also send invoices and bills to customers via SMS, Whatsapp, and other methods. You can use Zoho Books for the easy solution.
Receipts and payment gateway integration- You can issue receipts to customers as well as reconcile multiple payments against invoices. To automate invoicing and receipt generation, ledgers can be quickly integrated with any type of payment gateway.
Account statements- You can instantly generate and share account statements with clients, view customer-specific accounts receivables, overdue invoices, and send payment reminders with payment links. Create supplier account statements that include the details of the purchases, payments made, and payable.
GST return filing and ITC reconciliation- Through API integration, GSTR 3B and GSTR 1 invoices are directly issued from the LEDGERS. GST returns are also generated automatically based on data from invoices, payments, and credit notes. Filing the GST returns with LEDGERS, matching the purchases to the ITC received in the GST portal. Find the suppliers by refusing to provide the Input tax credit and follow up to avoid Input tax credit leakage. You can save money and time by quickly reconciling your purchases with the Input Tax Credit you have received.
Conclusion
The government must significantly reduce the burden of GST compliance on small businesses. Companies should also strive to improve their technical capabilities. Small businesses are critical to the growth and development of the Indian economy, so compliance costs should be reduced further to encourage individuals with limited resources to start businesses.Compliance Calendar LLP has made GST compliance for businesses extremely simple and easy! Ensure GST compliance today! Contact our team for the best GST compliance services.

It is difficult to run a small business. Small businesses struggle to be GST compliant because they have fewer resources (money, time, and personnel). While the government is working to make things easier, GST filing service providers are likely to be the best option for businesses.

The GST Council has established rules for all GST registered businesses to follow regarding record keeping, invoices, reporting purchases and sales, paying taxes, and filing returns. These rules and regulations must be followed by everyone. In other words, GST compliance is defined as adhering to GST laws and regulations. Non-compliance with GST regulations can result in significant fines and penalties being imposed on a business.

Small and medium-sized businesses are regarded as the backbone of the Indian economy, contributing significantly to GDP, export, job creation, and inclusive growth. They may believe that the burden of compliance has increased significantly under GST. The post-independence Goods and Services Tax was the most significant tax reform since the country's independence. There are some difficulties for both businesses and consumers. Here, are some of the ways on how small businesses can cope with GST compliance.

What is GST Compliance Rating?

The GST compliance rating is a score assigned to a business by the government that reflects the company's compliance consistency. Every taxable entity under GST, regardless of its nature, size, or turnover, will be assigned a GST compliance rating.

If buyers want to claim input credit for their products, they must show all transactions in which they paid GST to their suppliers, according to the law. The higher a supplier's compliance score, the better the buyer's chances of reclaiming input tax credit.

Checklist for GST Compliance

Although GST compliance rules are updated on a regular basis and are based on government standards, the GST compliance checklist can be divided into three categories:

Registration observance
Compliance with tax invoices
Compliance with tax filing requirements

Many other requirements differ depending on the type of business. Contact a GST specialist to learn more about them in depth.

Difficulties encountered since the implementation of GST

1. Determining ITC on Closing Stock

The most significant difficulty that trade is facing during GST implementation is determining input tax credit of excise duty and VAT included in stock of raw materials, work in process, and finished goods as of 30.06.2017, which must be carried forward to GST as opening balance of input tax credit of CGST and SGST respectively. This is also important in terms of avoiding the anti-profiteering clause.

2. Identifying HSN codes

Determining HSN codes not only for goods or services supplied, but also for goods or services purchased from an unregistered supplier and subject to reverse charge taxation. The number of digits of the HSN code must then be specified on invoices.

3. Determining Tax Rates

Due to the multiple rates prescribed for goods or services, it becomes a little difficult for trade to arrive at an actual rate. Furthermore, the rates for goods or services purchased from an unregistered supplier on which tax must be paid on a reverse charge basis in order to raise a self-invoice must be defined.

4. Identifying the nature of transactions

It is critical to determine the correct nature of the transaction in order to charge and collect the correct tax. To avoid future litigation, CGST and SGST must be charged on intra-state transactions, and IGST must be charged on inter-state transactions.

Reasons why Small Businesses are struggling to cope with GST Compliance

Financial Restriction

It's no secret that small businesses don't have a significant amount of flexibility in their budget. Because of such financial constraints, new businesses frequently make the fatal mistake of cutting back on accounting resources.

Small businesses face financial restrictions, and as a result, they make the mistake of reducing accounting resources. A study found that nearly half of small businesses do not use the services of a bookkeeper or accountant. This is why most businesses struggle to maintain GST compliance. As a result, it is recommended that you hire a qualified bookkeeper if you manage a small business. If your budget does not permit it, consider hiring an accounting service provider to do the work for you.

Lack of Professional Expertise

Another important reason why small businesses fail to comply with GST regulations is a lack of professional expertise in tax matters. Small businesses have a difficult time finding one because they cannot afford to hire in-house people with the necessary skills. Furthermore, small businesses cannot afford to devote their attention to anything else because they are focused on actions that will help them scale up their operations. Compliance is essential, but it must not come at the expense of true business expansion.

It is also undeniably true that small businesses cannot afford to devote their time or energy to anything other than the core activities that allow them to grow.
Compliance is essential, but it cannot be achieved at the expense of genuine business growth. As a result, small businesses may prefer to use CCL's comprehensive GST services.

Not Having the Right Tools

The Indian government's GST compliance standard applies to all taxpayers in India. They can meet this demand by using the appropriate tool to create, update, and record invoices. Small businesses, on the other hand, may struggle to afford the necessary set of tools for this purpose, as GST compliance necessitates accurate and methodical transaction documentation, as well as strict adherence to the authority's deadlines. Furthermore, the GST return filing deadlines and the GST compliance schedule must be strictly followed.

Reluctance to Seek GST Advisory

Hiring a dependable GST consultant can help you avoid missing important deadlines and stay in compliance with all things GST. Because you may not have the funds or the need to hire a full-time GST compliance officer as a small business owner, using an external GST compliance service to handle it on your behalf can be extremely beneficial. Furthermore, such third-party GST compliance service providers are well-versed in industry-specific GST regulations. And regulations include all of the tools required to ensure complete compliance.

These were some of the major issues, but there are several others that plague small businesses, such as infrastructure bottlenecks, a lack of formalization, slow technology adoption, and the ever-present issue of cash flow.

How can small businesses manage GST compliance?

GST invoicing and billing- You can quickly generate GST invoices from your mobile or computer. With the built-in catalog or contacts, error-free invoices with the correct GST rate and computation can be created in seconds. Billing in multiple currencies is supported by the platform. You can also send invoices and bills to customers via SMS, Whatsapp, and other methods. You can use Zoho Books for the easy solution.

Receipts and payment gateway integration- You can issue receipts to customers as well as reconcile multiple payments against invoices. To automate invoicing and receipt generation, ledgers can be quickly integrated with any type of payment gateway.

Account statements- You can instantly generate and share account statements with clients, view customer-specific accounts receivables, overdue invoices, and send payment reminders with payment links. Create supplier account statements that include the details of the purchases, payments made, and payable.

GST return filing and ITC reconciliation- Through API integration, GSTR 3B and GSTR 1 invoices are directly issued from the LEDGERS. GST returns are also generated automatically based on data from invoices, payments, and credit notes. Filing the GST returns with LEDGERS, matching the purchases to the ITC received in the GST portal. Find the suppliers by refusing to provide the Input tax credit and follow up to avoid Input tax credit leakage. You can save money and time by quickly reconciling your purchases with the Input Tax Credit you have received.

Conclusion

The government must significantly reduce the burden of GST compliance on small businesses. Companies should also strive to improve their technical capabilities. Small businesses are critical to the growth and development of the Indian economy, so compliance costs should be reduced further to encourage individuals with limited resources to start businesses.

Compliance Calendar LLP has made GST compliance for businesses extremely simple and easy! Ensure GST compliance today! Contact our team for the best GST compliance services.