Small businesses, under the circumstances, stated in Section 23 of the Central Goods and Service Tax Act, 2017, deal with the provisions of persons who are not liable for GST registration. With the advent of GST regime in India, the accounting community is investing a lot of energy, time and money on GST registered companies. This has created a huge vacuum in sectors like micro and small businesses, proprietary businesses, professionals, and freelancers.
Even though these businesses are not generating enough turnover to get covered under GST or handling GST exempt goods, maintenance of business records is necessary.
Business records
Business records include the sales and service invoices issued to customers, purchase invoices and delivery notes received from suppliers, and bills and receipts that were received for various business-related transactions that are recorded in the books of accounts.
The necessity of record maintenance
Even though record maintenance seems to be a non-essential issue from an income tax perspective as it has some alternative methods of calculating business profits for this segment of taxpayers, these books of records are important for applying for loans, answering any tax-related queries, business expansions, business forecasting, etc. Many small businesses are failing because of weak or lack of business accounting records.
With the imposition of stringent rules set by GST, supply of products or services by non-registered companies to GST registered companies has become increasingly difficult. Hence many small businesses are losing opportunities.
Accurate books of accounts help these businesses to forecast financial requirements in both short term and long term.
Reasons for non-maintenance
One of the main reasons for not maintaining books of accounts are the costs associated with it. There may be cases where there are very few transactions of higher value, or there may be cases where many transactions of lesser value. But they are not able to spend thousands of rupees on Accountants or not able to buy and maintain Accounting software or Invoice software applications that takes longer time to learn and maintain records by themselves.
There are many businesses which are going ahead in employing accountants in-house or who outsource it to some freelance professionals. However, they are still not able to get the desired results either because of lack of required knowledge or because of lack of focus and attention. This is also because many qualified professionals are focussing more on GST registered companies, as its payout is more lucrative.
How to resolve the issue?
Many small businesses either issue handwritten invoices or use generic tools like Microsoft Excel or google sheets) to create day-to-day transactions like invoices and vouchers. There is a higher risk of losing these documents.
An efficient, easy to work, secured Accounting software application, that can do everything for their business or profession, is required for small businesses.
