The GST reform was implement only about two years back and is one of the biggest reforms in the nation since independence. The GST is a single tax on the provision of goods and services across the nation, which means that the end consumers now only endure the GST charged by the last dealer irrespective of how complex the supply chain is.
The Union Government’s slogan for GST is ‘One Nation One Tax.’ and the reform is an effort to remove double taxation. The GST act mandates every Indian state to follow and implement only one law for taxation matters. With the execution of this tax, there has been a swift change in focus from tax on production to tax on consumption, thus benefiting the end users. The reform aims at simplifying and implementing a single tax regime across the nation that is in line with some of the major economies across the world.
By encouraging uniform taxation across the nation, GST will perk up the unity among Indian consumers by folding excess of central tax and the state levies into itself. The taxpayers are now obligatory to pay only one amalgamated tax.
Start-up India is a flagship program of the government of India, deliberated to build a sturdy ecosystem for the encouragement of innovation and start-ups in the country. The government believes small business has the potential to drive sustainable economic growth and create large scale employment chances. GST promises to encourage start-ups and make it easier to do business in India.
HOW CAN GST BENEFIT YOU?
Until recently, businesses with the revenue of more than INR 5 lakhs needed to get a VAT registration done and pay VAT which used to differ from state to state.
Under GST this limit is raised to INR 20 lakhs thus relieving many small businesses inclusive of start-ups from the tax burden. GST even has a scheme of lower taxes for the small businesses called the composition scheme. The scheme intends to bring relief from tax burdens to new businesses.
The start-ups that offer services until recently need to pay service tax. However, under GST establishment they can set out the tax paid on the purchases as service tax on their sales. It can be a big advantage to the start-up industry that is majorly providing services. The result can be a decline in costs, as a result, increasing the working capital to already cash-strained start-ups.
The complete GST process now is online. Start-ups now do not need to run around to tax offices to get various registrations done under Excise, VAT, and Service tax.
Start-ups typically work on a tight budget and cannot dedicate resources to look after the various tax fulfillment under Excise, VAT, CST, Service Tax, etc. GST being a simpler system reduced the time spent for the tax fulfillment.
Start-ups rustling with both goods and services will find it easier to file and pay one GST tax instead of both VAT and service tax.
Many start-ups are technological pioneers. Many offer goods and services through online portals. GST is valid all over the country; therefore, there is no impediment for inter-state transfer of goods.
The logistics industries in India had to uphold multiple warehouses across states to evade the CST and state entry taxes on inter-state movement. Managing warehouses across India under the previous system was tedious and cumbersome. As a result of GST, warehouse and e-commerce operators can now easily set up their warehouses at planned sites, anywhere in India. Reduction in the logistics costs can surely add to the profits of start-ups.
WHAT YOU NEED TO BE CAUTIOUS ABOUT GST
Start-ups in the manufacturing sector could be impacted adversely. The implementation of GST could raise the tax burden on production for manufacturing start-ups.
The mandatory registration for e-commerce even if their turnover is less than Rs. 20 lakhs can be an inconvenience to the small businesses that are undertaking online sales with a small budget and limited means.
With GST, everything shall be online and must be updated immediately, which would call for a regular updating and on an annual basis 37 returns have to be filed. The number of returns increases if the business is present in more than one state.
GST seems to be a great move by the Indian government to the boost of the economy and offer a healthy environment for start-ups and small business to thrive. Understanding the GST and its implications many look like a challenge today but is essential to operate with ease. Financial gurus believe that once you overcome the teething problems, there will be high conformity to the GST. This could lead to more accountability in the system and eventually many benefits the business.
If you are a startup and want to know more about this important tax, talk to our GST EXPERT now!