GST has specific rules concerning record upkeep, filing returns, sending invoices, reporting purchases and sales, etc. These rules constitute part of GST compliance, which is mandatory for businesses registered under GST.
But GST compliance isn’t as straightforward. Hence, many businesses, especially smaller ones, fail to comply with GST. During the GST transition period, small businesses relaxed on GST compliance. But in came COVID and changed the entire picture. The economic damages during the pandemic compelled the government to broaden the compliance horizon.
Today, compliance is as stringent for small businesses as it is for their larger counterparts, albeit with a different situation. Larger companies have the resources to manage GST compliance. But that’s not the case with the smaller players. Hence, most are failing with it. Of course, this failure has several valid reasons. So, let’s look at the three most common ones.
3 Reasons Small Companies Fail in GST Compliance
About 88-90 percent of small businesses fail to comply with GST rules and regulations for various reasons. Let’s look at three of them.
- Budgetary Limitations
Small businesses often have a tiny budget allocated to compliance. Of course, it isn’t that they don’t understand the economic repercussions of non-compliance. But they don’t have the budget GST compliance requires either!
So, to allocate an adequate budget for GST compliance, almost 50 percent of companies commit the mistake of cutting down on accounting resources.
Here, small businesses must remember that GST or GST compliance is specialized. Hence, they require specialists who are well-versed with all the GST laws and compliance aspects. Accordingly, companies must hire a full-time bookkeeper or outsource bookkeeping services, whichever is commercially viable.
- Absence of Professional GST Expertise
As said earlier, GST is a tax and a specialized area of expertise. Thus, dealing with GST effectively requires taxation experts who guide the company’s accountants or handle things themselves to ensure compliance.
But again, hiring in-house taxation experts can incur an exorbitant cost, which could be beyond the small business’s budget.
However, that doesn’t mean small businesses must continue struggling with GST compliance or give up on it. They can outsource GST consultancy and compliance and gain access to several experienced experts instead of that one in-house.
Outsourced GST consultants have the necessary expertise, experience, tools, and technologies to ensure timely GST payments and compliance. These services can help companies stay relieved from GST hassles and focus on necessary aspects like business growth, strategy, customer service, etc.
- Lack of Technology Infrastructure
Technology helps deal with the various intricacies involved in the Indian taxation system. It takes care of everything from essential dates to computing taxes appropriately. In addition, it can also help companies calculate the amount of taxes paid throughout the year to make finance-related decisions.
But most small businesses either work on incompetent or legacy systems or do not have them. In the case of the latter, many tasks are handled manually.
One of the main reasons for the ancient approach is the reluctance to adopt the technology. But one cannot discount the lack of funds required to deploy advanced technologies either.
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Working with us provides access to some of the most experienced GST and taxation experts and technologies that help you keep up with GST dynamics and keep penalties due to non-compliance at bay. Call us at +918080523161 or email us at firstname.lastname@example.org to learn more about our GST compliance services.