Goods and service tax or popularly known as GST is one tax to subsume all taxes. GST has brought in “One nation one tax” regime. In this blog we will know regarding GST Benefits for start-ups.
GST benefits for Start-ups
Following are the GST benefits for start-ups:
- Higher threshold for registration
As per the VAT structure, any business with a turnover of more than INR 5 lakhs has to obtain VAT registration and pay VAT. Under GST this threshold is INR 20 lakhs thus exempting various small businesses including start-ups. GST also has a system of lower taxes for small businesses having turnover between INR 20 to INR 1 crores though it’s voluntary. It is known as the composition scheme. This will bring relief from tax burdens to recently established businesses
- Start-ups can enjoy tax credit on their purchases
Various start-ups were into service industry which means they were paying service tax. Under GST system start-ups can set off the VAT paid on the purchase with the service tax on their sales which they cannot under pre system.
- Online simpler procedure under GST
The whole GST process starting from obtaining registration to filing returns and payment of Goods and Services Tax is online. Start-ups do not have to run different offices or department offices to obtain various registrations under VAT, Excise, and Service tax.
- Simpler taxation
Another GST Benefits for Start-ups is simpler taxation. Start-ups often start with a tight budget and cannot allocate resources to look after the range of tax compliances under VAT, CST, Excise, Service Tax etc. GST has subsumed all of this thus reducing the time used up for tax compliances. Also, start-ups trading in both goods and services have found it a lot easier to file and pay one GST tax instead of paying both service tax and VAT.
This means that the load of tax compliance is significantly reduced for smaller businesses.
- E-commerce and other online start-ups
Many start-ups are technologically pioneering meaning they have an enormous presence online. Many start-ups offer goods and services through the internet. Goods and Services Tax is applicable in all of India so there is no impediment for inter-state movement of goods. Previously, states have different VAT bylaws. For example, online websites (like Amazon, Flipkart) delivering to Uttar Pradesh, have to file registration number of the delivery truck and a VAT declaration. Tax authorities sometimes take hold of goods when the business fails to produce documents. Again, they are treated as mediators or facilitators by states such as Rajasthan, West Bengal, and Kerala not requiring them to register for Value Added Tax. All these disparity treatments and confusing compliances are eliminated in GST.
- Increased efficiency in logistics
Another GST Benefits for Start-ups is increased efficiency in logistics. In India the logistics industries had to maintain several warehouses across states to steer clear of the CST and state entry taxes on inter-state supply. There have been several cases where warehouses have to operate lower than their capacity thus rising operating costs. GST has united India by removing restrictions on inter-state supply of goods. This has brought warehouse consolidation in India. As an outcome of GST, e-commerce players and warehouse operators have already shown interest in setting up warehouses at tactical locations like Nagpur, which is considered the zero mile city of India and it is well connected. Diminution in unnecessary logistics costs will amplify profits for start-ups involved in supply of goods via transportation.
- Tax burden for manufacturing start-ups
However, start-ups in the manufacturing division will bear the brunt. Under the previous excise laws only manufacturing business having a turnover of more than INR 1.50 crores has to pay excise. Though, with the GST implementation, the turnover limit has been reduced to INR 20 lakh thus escalating the tax burden for many start-ups involved in manufacturing. However, after implementation of GST, most of the current challenges are a story of the past. India now has become one single market where goods can move freely and there are much lesser compliances and regulations to deal with for start-ups. Thus, Goods and Services Tax is a completely new tax system and has already taken India by storm.
Conclusion
Goods and Services Tax is a completely new tax system and has already taken India by storm. Goods and service tax or popularly known as GST is one tax to subsume all taxes. GST has brought in “One nation one tax” regime and we have seen above that are several GST benefits for Start-ups. Many start-ups are technologically pioneering meaning they have an enormous presence online. Many start-ups offer goods and services through the internet. Goods and Services Tax is applicable in all of India so there is no impediment for inter-state movement of goods.
