Effect of GST on Start Ups

The startup sector was believed to have grown fast when compared to another organized sector over recent years in India. Sharp pricing of products and maintaining operating margins have helped many startups quickly garner market share.

Easier Process for GST Registration:

Prior to the introduction of GST, many startups had to obtain VAT registration and/or service tax registration when they crossed an annual revenue of Rs.10 lakhs. On the other hand, the threshold for GST registration has been set at Rs.20 lakhs in most states. Also, there is no requirement for obtaining different registrations under VAT and Service Tax. Only one registration under GST is sufficient. Hence, GST registration will make it easier and cheaper for startups to get tax registration. Online services like IndiaFilings.com are already providing GST registration for startups at only Rs.2899.

GST Return Filing Simplified:

GST will straighten out taxes by incorporating all indirect taxes, making one single tax to be paid by everyone. The tax computations will be less demanding, in this manner sparing time and encouraging strength for the startup entrepreneurs to focus on the central capabilities of their business apart from tax-related processes.

Also, the GST return filing has been streamlined by the Government. Once, one return is filed by the startups at the beginning of the month on the 10th, the other two tax returns on the 15th and 20th are auto-populated by the GST portal. Hence, startups using GST software to file GST returns will find it easier to comply with GST.

GST Rates for Goods and Services:

Under the old VAT registration, startups needed to obtain VAT registration from the sales tax department from different states. Also, the tax rate for goods varied from state to state causing tremendous compliance burden. Under GST, GST rates are linked to HSN code or SAC code. Further, the GST rate for goods and services is kept the same across the country. Hence, GST will provide a clear path for startups to dispatch, extend or scale their business in a simpler manner.

Input Tax Credit Management:

Under the old tax system, since the states were each having a different indirect tax system, the flow of input tax credit was hampered leading to higher cost for the customers. Under GST, the input tax credit can be evenly managed and transferred between different branches of a business in a country. Hence, startups will be able to better utilize input tax credit provided by the Government and reduce the cascading of taxes. Hence, the cost of goods and services is expected to reduce over time, thus providing relief to customers and businesses.

GST E-Way Bill:

GST E-way bill was expected to be introduced by the Government on 1st July 2017 to control the flow of goods. However, since the facility was not made available on the GST portal, the Government has decided to push the GST E-Way Bill to another day. Hence, until the GST E-Way bill is introduced, goods transfers can be made easily.

Also, once the E-way bill is introduced, the procedure for generating an e-way bill is simplified on the GST portal. Hence, all entities will be able to easily generate the required documents for the transfer of goods from one place to another.

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