Important Updates for Small- and Medium-sized Businesses in India

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Fuelled by bright ideas and innovations, the small- and medium sized business (SMB) sector has undergone a significant number of changes in recent times. Legal, business and financial in nature, these changes have helped new sellers flourish. Operating small businesses have become easier as a result of these changes. These ‘updates’ have also potentially helped entrepreneurs generate greater profits. SMBs are unique in many respects and they have been successful in tapping new opportunities of growth in their quest of developing their business.
Small and medium size businesses
Here are some of the reasons why SMBs are set to do well in India:
  • India’s population crossed 1.3 billion last year. Evidently, this is a significantly large pool of customers ready to shop from you.
  • With growing earnings, customers have more disposable income to purchase goods – from essential items and electronic devices driven by technology to perhaps even a few luxury holdings.
  • People living in different parts of the country have their own unique requirements governed by their local tastes, interests, and food habits. This can be catered to by SMBs.
  • Media, internet and mobile apps have raised the awareness levels of customers on new brands and products available in the market space. SMBs give them instant access to shopping websites or apps to help shop from the comfort of home.
SMB sector update
With more customers, elevated incomes and more shopping needs to cater to, the opportunities are clearly endless. Improved internet facilities have also helped SMBs to go online to market and sell their services or products. Therefore, the SMB sector is one that keeps moving quickly and keeps on the growth track.

As can be expected, this rapid growth has led to many new rules, regulations and laws being formulated so that it is easier for sellers, customers, and government authorities to operate in this sector.

Below are some of the current changes and updates in the SMB sector.

1. Finance

Goods and Services Tax (GST)

This new tax has had the biggest impact on SMBs. It was implemented in 2017 and replaced the existing system of multiple taxation levied by the state and central governments. Geared to simplify the then-existing taxing system, the GST consists of regulations, rules and taxes managed by a GST Council. Before the implementation of GST, the tax rate on many goods was set at a standard 26.5%. After the implementation of GST, the tax rate for most goods falls within 18%. There are currently five tax slabs – starting at 0%, then 5%, moving up to 12% and 18% and then finally 28%.

Before the GST came to be implemented, buyers had to pay luxury tax, purchase tax, service tax, VAT, central sales tax, customer duty etc. alongside GST. Many of these individual taxes have now been placed under one single tax. This simplified the ‘tax upon tax’ complications that had in the past frustrated many small business owners. As of date, the new GST tax brackets are planned as follows:
  • Central taxes: Service Tax, Central Surcharges, Additional Customs Duty, Central Excise Duty and Special Additional Duty of Customs.
  • State taxes: VAT, Purchase Tax, Entertainment Tax, Luxury Tax, CST, OCTROI, Betting/Gambling/Lottery Tax and State Cess.

How has the GST impacted SMBs?

GST impact on SMBs
Easier for Entrepreneurs to set up Businesses across India

To start any venture, the business owner is required to visit the Sales Tax Department for a VAT registration. But each state has its own VAT registration process and fee structure. As a result, it was difficult for a business operating across many states in the country to comply with the different regulations in different states. GST fixed this issue by giving the sellers a new centralized registration. A business owner can now use one GST registration that is valid all across India.
Easier Tax Calculation

How much do you owe? What are you exempted from? Many SMBs sell goods with merged services and have to follow both Service Tax and VAT rules. Calculating taxes on every transaction was difficult to work out in the past. This, in turn, affected the calculations of financial benefits for the business owner. With GST, this compartmentalization no longer exists and the invoicing only has one rate.

2. Technology

Technology for Tomorrow

Some recent changes have shown us how delicate the SMB economy actually is. Many start-up owners felt disconnected from their trusted customers with the market scope diminishing dramatically in recent times. In these last few months, sellers have faced unforeseen challenges. With conditions evolving slowly, recovery has remained slow but consistent.

How has digital rebooting helped SMBs?

Even in the ‘new normal,’ Indian SMBs are tipped to be top global players. They have begun to digitize their operations by adding cloud tools, new UPI payments, automated order delivery signing, contactless order processing, etc. These innovations have shown us how easy it is to:
  • Protect cash flow in new, innovative ways
  • Carry on working safely and improve productivity along the way
Many of these digital risk takers have reported how their profits are now being generated 50% faster while access to markets is also 51% higher. Many SMBs have recovered significantly from their recent setbacks using technology. It has also shown them how helpful some of these technologies really are in generating business. They have learnt, first hand, how many of these tools of technologies are an absolute necessity in the smooth functioning of their enterprise. More and more business owners are now convinced that business will ultimately look to move online.

3. Marketing

Another big change is the use of the mobile handset and other portable devices as a means of marketing. Several SMBs do not often have huge budgetary allocations for elaborate advertising campaigns. So, how do they reach thousands of customers on a small budget? The answer lies in the use of social media.

Social media reaches out to customers at a personal level. Apart from building awareness around any brand, it can also:
  • Potentially increase traffic to their dedicated websites for purchases by interested shoppers.
  • Use the channel to post notification, updates, events, special offers to inform these shoppers.
  • Attract new customers by encouraging post shares, comments, retweets, likes etc.
  • Get immediate access to consumer feedback, reviews, interests, concerns and preferences.
  • Develop an idea of the kind of services, products the customer wants.
  • Advertise any new services, or products they come up with.

How can SMBs use social media intelligently?

An SMB can generate a lot of business optimizing the use of a single platform and there are many to choose from. For start-ups and SMBs, two of the biggest advantages when using social media are customization and affordability.
Social media for startups
  • Messages posted to their customers can be customized. For instance, they can add discount codes when posting about a new product. They have control over issues like the images to use for their advertising campaigns online, deciding on how many posts to publish and when to publish them etc.
  • Social media platforms are budget friendly: If you are a home-based entrepreneur, you can very simply post any advertorial content on any item you wish to sell. It will cost you nothing and you can use your own social media account or create a new account for promoting your startup. Additionally, you can pay to boost these posts, that is, for the posts to receive better visibility.


There has never been a better time to start a SMB in India. Financial aid, technological evolution and marketing innovations are fueling this ascendancy. If you are looking for the best way to market your brand, get started now by registering on Amazon.
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