The buzz on GST and its impact on various industries have been the hot topic lately. All discussions are around how GST will change the way India does business and how various industries are going to benefit from the shift in tax regime.
Experts believe if GST is implemented the right way it will lead India to a higher position in the ease of doing business boosting foreign investment, especially in the startup ecosystem.
The government is moving forward to meet its July 1, 2017, deadline and so are all the enterprises. Startups too, like other enterprises stand to gain with GST and its high time they start preparing for it.
Businesses, especially startups will face challenges in transition and application but they stand to gain with GST and even these few benefits listed here are enough reason for startup community to cheer for GST.
1. Increase in turnover limits for registration
Under the current tax law, a business dealing with goods with a turnover exceeding Rs. 10 lakh is required to register with the authorities and obtain a TIN (tax identification number). And, a service provider needs to obtain a registration with a turnover exceeding Rs. 9 lakh, but not under the GST regime as the limit has been increased to Rs. 20 lakhs.
So if your startup is at an early stage with turnover below Rs. 20 lakh you need not worry about the formalities and continue with the good work without registration.
2. DIY model
The transparent tax system is the major benefit of GST. Most of the procedures would be done online including the taxpayer registration, return submission, tax payment and refund claim.
Many startups lack dedicated resources to look after these issues and since with the GST model all these things are simplified and streamlined, an entrepreneur can do it all by themselves.
3. Free flow across the country
With GST in place, India will be one single market, free from state entry levies. GST will highly impact logistics increasing the efficiency and contributing to the profitability of e-commerce startups as goods and services will flow easily across the nation without state entry taxes. Quick and timely delivery would be an added benefit.
4. Tax credits on purchase
The startups that are into service industry pay service tax. But under the GST regime they can set-off the VAT paid on the purchases with the service tax on their sale, resulting in reduction in costs.
5. Manufacturing startups will bear the burden
The startups in manufacturing industry will be the ones not happy with the GST regime. Manufacturing businesses with a turnover more than Rs. 1.5 crore pay excise under the current tax law, but the turnover limit has been reduced to Rs. 20 lakh increasing the tax burden for manufacturing startups.
Although GST is at its initial stage and things will get clearer once it is effectively in place, but from what is visible now, it can be presumed that India will become one single market with free flow of goods and services giving startups more and better opportunities.