Goods and services tax (GST) is the most burning topic in India. GST will have its impact on every industry. All are thinking that how GST can change the way of business in India. Another question is how different industries are going to benefit from new tax regime. It is said that if GST is implemented correctly, then India will improve its position in the index of ease of doing business maintained by World Bank. Moreover, it is also projected that foreign investment in India will be increased.
All industries should prepare themselves for changes in their system for GST i.e. all industries have to adopt system in accordance with GST. GST will benefit the whole country but startups have more reasons. So, this is the time when startups could take a benefit of GST.
The benefits of GST for startups are listed below:
Increase in turnover limits for registration
Under the current tax regime, a trader of goods has get registration under the state tax laws i.e. VAT, if the turnover in a financial year exceeds Rs.10,00,000 and obtain tax identification number. And in case of service provider, if the value of taxable services exceeds Rs.9,00,000 service provider has to take registration. But in GST tax regime, this limit has been increased to Rs.20 lakh for any of the above. The startups need not take tension for compliances if the turnover is up to Rs.20 lakh
Self- dependent model
Under the GST regime, the taxation system is transparent. All the compliances are to be done through online mode. This will be a great benefit for startups as startups are short of funds for hiring experts or professionals which can look for all these compliances. These compliances include registration, filing returns, tax payment and refunds. Moreover, under GST regime these compliances are streamlined in a very simple way so that entrepreneur himself can do all these compliances. So GST is self-dependent model.
Free flow of goods and services
After the implementation of GST, the benefit for startups will be the free flow of goods and services across the whole country. On an average a truck travels less in a day in India as compared to other countries. This is because of check posts and entry tax on every state borders. After GST, there will be no different taxes. There will one single market free from state entry tax. This will also increase the efficiency and profits of the organization in India. There will quick and timely delivery of the goods.
Every startup has to maintain liquidity for being operating in the society and to raise funds in future. So liquidity is one of the major challenge faced by the startups. Under the current tax regime, the funds of businesses are stuck with tax authorities in form of refund which reduces the liquidity of the business which further makes it difficult for businesses to raise fund. Under GST regime, the processing of all documents will be online, thus quick refunds will be there from tax authorities. This will increase the liquidity of the business thus making easier for businesses for raising funds.
Single Blanket tax system
Under the present tax regime startups have to obtain many registrations under various indirect taxes such as CST, VAT or service tax and pay all these taxes wherever applicable thus increasing the cost of the goods & services as input tax credit of all taxes was not available (like CST). After GST, there will be single blanket tax system i.e. startups do not have to take all registrations, they have to take registration under GST only and have to pay tax accordingly. There will be a single tax levy. The procedure to avail input tax will be easy as the input tax credit will be available and thus reducing the cost of goods & services as compared to current tax regime.
GST will reduce discretion power of the assessing authority. A transparent taxation system with less corruption will be implemented with GST. Moreover, GST will help to increase GDP of country as there will be decrease in the cost of goods & services due to single blanket tax system there will be increase in the consumption thus increase in production of goods & services which will add up to the GDP of the country. GST will curb the fiscal deficit of the economy as there will be increase in the revenue of the government due to easy compliances and the benefit of availing input tax credit of all taxes paid.
About the Author
Arpit Goyal is pursuing CA and B.com & also working as an article assistant in Gurgaon. He has an immense interest in Taxation. He loves to use technology to spread knowledge about taxation & accounts.