GST is expected to bring in positive waves for start-ups and promote the ‘Make in India’ initiative introduced by Prime Minister Narendra Modi.Known as the potential ‘game-changer’ for the Indian economy, GST brings a good impact on start-ups for most of industries.
Have a look at a few points in detail that covers GST’s impact on Indian Startups:
Increased registration threshold –
Before GST business’ which had a turnover of about 4-5 lakhs had to pay VAT but now after the introduction of GST the amount has increased up to 25-50 lakhs. Apart from that it also has other benefits.
BENEFIT OF TAX CREDIT ON PURCHASES –
Startups in the service industry had to pay service tax before GST but post GST implementation the service tax on the sales can be setoff instead of the VAT on the purchase. This is a big relief for service providing startupsas it will result in reduced costs and in turn increase the working capital.
SIMPLIFIED PROCESSES –
With GST the end-to-end process from registration to filing returns and making payment has moved online which earlier had to be done either by running between offices or via agents and CAs and included their fees as well. The online process of tax filing and managing payments has become hassle free for startups. Other than this startups dealing with both goods and services had a bigger problem to deal with, with both VAT and service tax. With GST it is easier for them to pay all taxation as one.
EFFICIENT LOGISTICS –
To avoid state entry taxes before GST, companies used to have multiple warehouses across states and moving goods from state to state was a cumbersome task. Post GST warehouse owners and online retailers have started strategizing the warehouses locations at the right places instead of scattering it everywhere. Above all unnecessary logistics costs also have been avoided.
GST AS CHALLENGE FOR THE MANUFACTURING STARTUPS –
While GST has brought in a positive impact on all other industries, for the manufacturing sector the news isn’t as good. Before GST manufacturing companies with a turnover of more than Rs 1.50 crore had to pay excise duty but with GST implementation the threshold has been reduced to Rs 20 lakhs, increasing the tax burden for start-ups in the manufacturing sector.
TO SUMMARIZE –
While industry experts are positive and have welcomed the tax standardization, it is too early to conclude if the impact is good or bad. GST no doubt has GST will improve the way business was earlier startedin India.