The GST or Goods and Service Tax has brought to life the "One Nation, One Tax" regime within India. The tax system has been implemented across the country and is an indirect tax that applies to the supply of goods and services. It is expected to fuel the economy in the long run and bring about an increase in revenue collection. GST has its implications on every segment of the market since its introduction, including startups. India is a nation that is growing at a steady pace, and the progression of start-ups will impact the economy's growth. Read on to understand more about the impact of GST on startups.
GST is believed to be instrumental in the thriving of startups in India. It is expected to be a boon to medium and small enterprises. However, as with every system, it is also likely to carry some barriers.
As per the laws of GST, a business with an annual turnover of ₹ 20 Lakhs and more must register for GST. This exempts several startups that may have a turnover of fewer than ₹ 20 Lakhs. Additionally, through the composition scheme, GST also supports a lower tax slab for businesses that have a turnover of anywhere between ₹ 20 Lakhs and ₹ 1 Crore. These new limits on taxation will bring about respite to the newly established startups.
Today, a growing number of startups in India are recorded under the service industry. This essentially means that they pay an amount towards service tax. As with the GST regime, they can save up on the VAT paid on purchases that include service tax. This redemption is not allowed through the current taxation system. The GST regime will reduce cash outflow and assist startups that already face a cash crunch.
As part of the current regime, logistic companies across the country maintained multiple warehouses across different states of the country. This was majorly done to avoid the Central Sales Tax and other state entry taxes that were attracted owing to inter-state movement of goods.
GST eliminates the need for startups to visit tax offices to obtain registrations or file returns. Under the GST regime, authorities have ensured to provide the complete process online through the official GST weblink. Whether it is paying GST or filing returns, every step can be completed online. Startups do not have to be hassled with spending time and resources on meeting tax compliances.
With GST, startups can enjoy the benefits of eliminated restrictions on interstate movement of goods. There will also be a reduction in the need for major warehouse operations across the country. Logistic companies can move towards strategically building warehouses in well-connected cities of India. This will, in turn, reduce the unnecessary cost that is incurred on the transportation of goods. Startups that particularly supply goods across the country can derive value.
Startups are increasingly establishing their presence online. This includes offering products and services through various digital modules. As part of GST, a business can enjoy the convenient movement of goods without complications. They do not have to follow the different VAT laws that are laid out in different states. Failure to comply with these laws can also lead to the seizing of goods. Keeping up with different tax laws in different states leads to major business losses. With GST, e-commerce industries can expect to follow a standard tax procedure.
Manufacturing startups will face the negative impact of GST. As part of the current excise laws, manufacturing businesses with more than ₹ 1.50 Crores turnover have to pay excises. With GST, the turnover limit has been brought down to ₹ 20 Lakhs. This ultimately leads to manufacturing startups making bigger payments in the form of tax.
Startups need to have a stronghold on the taxation implications that are carried with GST. Knowing well about the regime and addressing them effectively is the best way for startups to obtain the best from the Goods and Service tax. Follow Bajaj Markets to know more about GST on startups and updates made against the same.