Small and medium businesses play a vital role in India in terms of growth, innovation and employment. However, they have difficulties with GST and taxes. The policies are updated frequently and filing is complex and as a result of this it may seem that it is difficult to comply with policies and this is particularly difficult in the case of growing firms with limited resources. This is a basic step by step approach on how MSMEs can go about the GST and tax process.
The first thing to do is to determine the taxes to be paid by your business. Majority of MSMEs are supposed to pay GST that substitutes many of its previous taxes like VAT and service tax. Unless you are a service provider, you have to register GST in case your annual sales exceed ₹40 lakh (or ₹20 lakh in case of a service provider). You can register voluntarily even when your sales are less than that value to receive input tax credit and get your business more credible.
An MSME must pay income tax, TDS (Tax Deducted at Source), and professional tax among other GST, depending on the business setup and location.
It is possible to register GST online in the GST portal (gst.gov.in). The documents that you will require include PAN, Aadhaar, evidence of the location where your business is located, and bank account information. When you get registered, ensure that you put your GSTIN (GST Identification Number) on all invoices.
The tax laws in India are dynamic. Keep track of the notifications, the deadlines of filing the papers, and the changes in rates with the help of trusted advisors or official state websites. Failure to comply with rules might attract penalties, interests, or legal implications.
Maintenance of records is the base of maintaining compliance. Record every sales, purchase, tax credit you can claim and expenses. To save time and minimize errors, use something like Tally, Zoho Books or QuickBooks to do the calculating.
It is also easy when you save the records digitally in case of a tax audit or when you need to review your books. And one of the big reasons why GST notices are received by small businesses or their refunds are held is because their records are wrong or missing.
You are required to submit GST returns GSTR-1, GSTR-3B and annual returns in time. Late fees and losing compliance rate might be imposed on you in case you fail to meet deadlines.
In case of income tax, file returns are due by July 31 (especially in case of individual or partnership) or by October 31 (especially in case of company). In case it is too tough to comply, you may contact a tax consultant/advisory firm to assist in filing and updating. It is less expensive than imposing fines and compliance issues.
Tax compliance isn’t just about meeting deadlines – it’s also about tax planning. MSMEs can save significantly through deductions and incentives under sections like 80C, 80JJAA, and startup benefits under DPIIT. Choosing the right business structure (LLP, Pvt Ltd, or partnership) can also optimize tax liabilities.
Working with experienced professionals, like BusinessPlus Advisors, can simplify the entire process. From registration to filing and long-term tax planning, they ensure your MSME stays compliant, audit-ready, and financially efficient.
GST and taxes may sound difficult, but, when the right systems are used and with the assistance of an expert, small and medium businesses can use it to their benefit rather than a cause of stress. Proactive prevents not just penalties, but also prevents customer trust, lender trust and partner trust, which forms a solid foundation to grow long term.
BusinessPlus Advisors Private Limited
At BusinessPlus, we believe every business idea deserves the right foundation, strategic guidance, and regulatory clarity to thrive. We are a full-service business consulting Company dedicated to empowering entrepreneurs, startups, and growing enterprises in India.
