Startup Ecosystem: What GST Means for It
The long wait for the new Goods and Services Tax (GST) anticipated by the government of India with the 122nd constitutional amendment has finally come to reality. Geographically India constitutes twenty-nine states and seven union territories which call for a large management and the introduction of GST as unified taxation system is obviously an exciting and the whole country is looking forward to how it will turn out. The motive of GST is to bring profit to the organizations both large and small. Apart from organizations, fresh startups can also hope to face a better ahead. In the present, India hosts forty-two thousand startups and also the third leading country in the world in terms of ecosystem startups with an impressive 40% development based on yearly achievement. GST is set to provide support it in every positive way possible for the Startup Ecosystem businesses in India.
Startup Ecosystem: Explained
- As mentioned above about the vast number of states and UI, the different taxing for all these states gets complicated and makes the procedure of taxation more troubling and difficulty in achieving a smooth tax flow. The new GST will eradicate the complex taxing system and incorporate all the indirect taxes into one unified tax which will be imposed on all the citizens of India qualified under the terms listed. It will lead to fewer tax computations giving an opportunity to the young entrepreneurs to focus on their businesses’ core strength.
- The new system also opens up easier registration which will call for simple scaling. Earlier, the business ventures needed to register VAT from the sales tax departments for a new business venture, and the businesses involved in multiple states should have to apply for different registration method and also pay tax in accordance with the state taxation policy. But now with the new GST, it will supposedly bring consistency and incorporation of organizations by providing single permits which will be enough to start new ventures in multiple states as long as the tax is being paid. This will be a game changer as the paths will be cleared for the startups to expand and scale their ventures efficiently.
- The taxation laws which are currently in motion has VAT connected to organizations which amount to five lacs and even higher based on VAT Composition schemes options that organizations can choose from for as a way to lower the tax rates. However, this isn’t pleasant to most businesses despite the conditions to bring down the taxes. GST aims to refine the existing system and bring a new system to provide higher tax exemption. As for the business having ten lacs and lower will be exempted from tax while the ten lacs and above will be charged with lower tax rates. In this way, not only will the burden of tax get easier but will also, in turn, help the organizations to expand their businesses.
- The logistics are also to witness enhanced proficiency due to the simultaneous development of goods and markets in the country and this is definitely good news for the startups mainly because of the state border checks and the casualties of paying tax. The state border check usually delays the transportation of goods which strains the business and the tax casualties include the payment of taxes for every state on entering and moreover the logistics aren’t available which makes it difficult for smooth stock exchange.
- GST hopes to remove such inconvenient aspects and make the interstate exchange of goods and products less expensive and less complex. And in this manner, the minimum stock maintenance for the organizations will also be lessened. According to the analysis of CRISIL, it is indicated that GST will lower the logistic costs by twenty per cent or so for the organizations handling non-bilk goods consisting of railroad transported goods other than the main essentials.
- Aside from the upsides of GST impact on startups, there are also downside effects on them. GST may likely place additional load on the startups when it comes to the manufacturing area and turnovers. With the existing excise duty laws, the businesses having turnovers of 1.50 crore and less are not included under obligations of tax but in the new system, this is likely to change as the government intends to make the turnover limit as twenty-five lacs for exemption benefit which is going to be a harsh check for certain startups.
- Another downside is the law of submitting monthly and quarterly based information on the semantics of business deals held. This is will be more inconvenient for web businesses since they will have to handle more minute details and will lead to costly documentation followed by the rise of goods’ price which will then finally hit the consumers.
However, to be practical, despite its shortcomings and disadvantages it is safe to say that GST registration is in fact, the first taxing revolution that India will witness. It is envisioned to bring together the different organizations’ works and government taxes under one roof. Hence, even with the disadvantage foreseen for in the case of startups, GST is still the best option to go with for a clear and bright venture road.