India has a complex tax system where it becomes difficult for new startups to navigate with various kinds of direct and indirect taxes. But now things will change with the new Goods and Service Tax (GST). The introduction of GST will reform the indirect taxation in India. Today in this article I am going to tell you about GST in a detailed and simple way so that you have a better understanding about GST. I will start with what is GST Registration?
GST is an Indirect tax which will bring most of the taxes under a single tax. GST will remain uniform across the whole nation and make India a common marketplace. In the present scenario, taxes are levied separately on goods and services by each state, but after GST there will be a single tax on the manufacture, sale, and consumption of goods and services throughout the country. GST will replace all the taxes levied by central and state government. Taxes will be paid after value addition on each stage, so the consumer has to pay the GST which is charged by the last dealer in the supply chain.
Indian startups have welcomed the new GST bill. Now the question is, “How is GST going to affect Startups?” So let’s see
The Impact of GST on Startups
1. Lower Tax Burden
As per the current tax structure business which has turnover more than INR 5 lakh has to pay Value Added Tax (VAT). After GST this limit will be increased to INR 20 lakh and for the turnover less than 50 lakh tax will be charged at a lower rate in the composition scheme. This will reduce the tax burden for the startups.
2. Simple Taxation Process
Taxation process will become simple, and businesses have to pay a single tax. GST includes all taxes such as VAT, Excise, Service tax, etc. After GST there will be no need to register under different taxes. GST is entirely online from registration to tax payment. It will be become just a click away to register for GST and payment of tax. This will save lots of time, energy and cost of filing tax.
3. Reduced logistic cost and time
In the current scenario movement of transport vehicle gets slower across the states because of state border tax and check post issues which lead to higher transportation cost. After GST cost of interstate transportation reduces and movement of goods will become easy, fast and cheaper. It will enhance the profitability of business.
Now companies have to maintain warehouses across all the states where they are doing business to avoid the interstate taxes. It enhances the operational cost, GST will bring the warehouse consolidation which will reduce the operational cost and businesses and startups will become more profitable.
4. Benefit for Manufacturing Startups
The new GST regime will reduce the tax cascading it will lower the cost of production which will make the goods more competitive. GST will reduce the time and cost of cross-border transportation and the supply chain will become more efficient which is again a significant advantage for the manufacturing industry.
5. Online Startups become simpler
Online startups have their presence nationwide, and currently, there is a complication in tax laws state wise. GST will allow the free movement of goods, and it will lead to more efficiency in the whole process.
6. Single Tax for Products and Services
Businesses that deal in both products and services such as Restaurants has to pay VAT and Service Tax separately after GST they have to pay a single tax. It will save the time and energy to calculate the different kinds of taxes and make the process simpler.
GST is expected to be implemented from 1st July 2017. It is estimated that GST reform will increase the GDP by about a percentage point. The free movement of goods from one state to another state without any paperwork, state tax and stopping time, of hours, on state borders will make life much easier. Government, businesses, and consumers all will be benefited by GST. We hope for a better future with the GST reforms.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the publication