GST Simplified for Startups
GST is one of the premium taxes levied on customers to subsume all the taxes. Indian Government has implemented GST in order to put all taxes together on a roof. However, the implementation of GST has initially affected the way of start-ups operation in India.
It has majorly enhanced the new start-up’s numbers in the past 3 years of victorious implementation. This emergence of a new tax regime was important to shatter various indirect taxes.
Therefore, the GST norms for startups were brought forth with this slogan, “one nation one tax” regime to facilitate the compliance process for small to medium businesses, precisely for start-ups.
GST Rules for Startups in India
This article mainly aims to let you know various rules of GST for startups, pros, and cons, the positive and negative impacts.
With the brand-new tax structure for small businesses and start-ups in India, it’s high time for us to identify if GST would become super beneficial for startups or not! Some of the extraordinary GST rules for startups in India are shown below:
Superior move for e-commerce and online startups
For those businesses, which provide merchandise and services via various online platforms, GST works as a boon. The startup businesses will not be required to list for isolated VAT legislation during the inter-state transportation of goods. These businesses are bound by the single tax, names GST.
The maximized threshold for registration
Under the previous law, businesses with a maximum turnover of approx Rs. 5 Lakhs can register. But, the GST has alleviated the process by increasing the limit to an overall turnover of Rs. 20 lakhs. This is one of the best news for startups and small businesses.
Tax load for manufacturing startups
Previously, under the subsisting excise law, manufacturing businesses with a major turnover of over Rs. 1.5 Crore was needed for paying the excise tax. Therefore, with GST implementation, the turnover ambit has been curtailed to Rs. 20 lakhs. This is a piece of pretty bad news for manufacturing startups.
Online registration and filing of GST
The whole procedure of filing and registering GST tax returns and payments is online. Therefore, it mollifies businesses from challenging tax offices to complete the registrations for various taxes. All thanks go to GST as it helps reduce the time required for paperwork.
Service startups to acquire tax credit
The GST implementation has come with precise relief for the startups in this service industry. It imposes a specific service tax amount on the customers. Under GST taxation, they can effectively include the VAT amount reimbursed on their purchases with the service tax to their customers on sales.
Eligibility for new Indian startups
The startup India campaign was announced by our respected Prime Minister, Mr. Narendra Modi, in 2016. This scheme is to inspire entrepreneurs and uplift India’s entrepreneurship. Such an amazing campaign was primarily focused on:
- Easing incorporation procedures
- Boosting bank financing
- Permitting tax exemptions and other amenities of the start-ups
Startups in India can highly leverage numerous advantages and exemptions under GST. According to the Startup India Action Plan, the below-mentioned criteria make a small business idea appropriate to become a full-fledged startup.
- A startup can’t be formed by breaking off a business that still exists.
- A powerful or an eligible one is targeting to work towards invention, commercialization, creativity, and deployment of goods or services and business procedures.
- It must be technically streamlined; driven by intellectual technology and property.
- A venture is imperative to acquire an eligibility certificate from the inter-ministerial board establishment.
- A startup’s annual turnover must not go beyond INR 25 crore.
Pros and Cons of GST implementation on start-ups
Impact of GST for startups – Pros
- Propagated markets
GST has combined all the states and territories of the Indian nations like never before by creating a top-notch business field for everyone. Previously, startups and small businesses used to ambit their reach within the state, dreading the tax burden and other convolutions on interstate sales.
Therefore, GST has expelled this fear and translocate the tax credit regardless of the location of the seller and buyer. This brand-new regime inspires the entrepreneurs to overlook the intra-state business and expand more.
- Consolidation of innumerable taxes
The budget of compliance and the intricacies of various taxes and strict inter-state movements have drastically ended. This singular streamlined taxation integrates the maximum of the previous taxes and reduces the ultimate burden on the taxpayer.
- Increased logistics and expeditious service deliveries
Goods and Services Tax or GST doesn’t possess any facilities for “entry tax” for the merchandise manufactured or traded in any part of India diving in accelerated goods delivery at toll checks and interstate points.
As per the CRISIL report, the manufacturing charges of bulk items will be curtailed significantly, resulting in a higher demand for eCommerce of endeavors.
Impact of GST for startups – Cons
- Technological hindrances
GST is an online module that needs accuracy and proficiencies to acquire the precision level required for yielding a high GST compliance rating. Moreover, it will also have to expend on the ASPs and GSPs, the intermediaries. Such recurring services would unquestionably hit the profitability line of the startups and the small businesses.
- Restrained working capital
The newest generation of 21st-century taxation mechanisms would have a requirement for underpinning the electronic form with the tax department. It leads to a hindrance of the massive capital.
Moreover, this incorporated tax credit mechanism will again lead to choked capital. The businesses would have to share or divide a segment of their working capital funds under GST irrespective of the interest benefits.
Concluding words
Execution is the best strategy for bringing ingeniousness to life. Likewise, GST plays an evitable position while implementing an efficient tax system. It intends to build a positive impact for Indian startups.
Is your new startup striving with lots of accounting tasks? GST returns, tax filing, and adoption of digital procedures help you run the errands. This system is pretty progressive and amazingly complies with the startups. So, GST is much required!
