What Is The Influence Of GST On The Working Capital Of Your Business? - Farah Atelier


Tuesday, December 11, 2018

What Is The Influence Of GST On The Working Capital Of Your Business?

Since independence, the GST is perhaps the most complex financial reform introduced by the Indian Government on July 1st, 2017. More or less the small to medium-sized businesses faced the results after the implementation of the Goods & Service Tax undertaken by the Government of India with the hope of simplifying taxation processes but somehow the businesses have experienced mixed experiences so far according to diverse sources.

It was predicted before the implementation of GST in Indian markets that the working capitals of the small to medium business will be grossly affected and somehow it’ll be challenging for many such establishments to survive the transition. Working capital is the cash that any business needs to run the regular operations smoothly. If your business lacks sufficient funds for bearing the regular expenses, apply for the working capital loans for the hassle-free online application, quick approval, and instant money transfer. The working capital is the major factor of any business. With the implementation of GST, the working capital of businesses is highly affected by inventory to procurement. Business owners have to put the focus on the periodical assessment of the requirement of their working capital and now they have to consider the impact of GST as well. The taxation depends on the type of business, location, annual turnover, etc.

Even it has to be taken under consideration when the company is taking credit from a financier. So, it can understood, how the new implications of the GST is influencing the working capital finance.

The impact of GST on Working Capital- A Discussion

Surviving the regular business operations come out to be challenging to SMEs and companies with a very limited financial reserve. The working capital of your business is the reflection of the financial health of the company you run. GST has a direct link with the working capital of any business. Right now, there are four slabs of GST- 5%, 12%, 18%, & 28% so depending on the math, the taxation will be implemented on the oxygen of your business, i.e. the working capital.

How the Inventory Businesses Are Surviving?

Business linked with warehouses and particularly operated by the inventory management is thankful to the implementation of GST. Previously, they had to rent spaces in warehouses across various states depending on their taxes. Their intention was to avoid the heavy taxes they had to pay while crossing the borders. Things were more complicated and the companies had to deal with the complex warehouse management for saving taxes. But now things are more streamlined as the central government has come up with the one-time tax payment by reducing the hassles of recurring payments of taxes on every border of the states, CSTs, Octroi etc.

The procurement of raw materials industries predicted that the implementation of GST would help them in saving taxes but according to many, things didn’t happen as predicted as the business expenses are different depending on the industries.

For example, previously a raw material manufacturer had to pay 14% under the old slab which has now increased to 18%. The same has happened in the service industries. Where the customers used to pay 15%, now they have to pay 18%.

Therefore, if you want to beat the heat generated by GST, you have to raise capital of your business to give a tough fight to survive in the harsh market scenario.

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