Finally the motto of ‘one country, one tax’ has become reality. The Friday midnight (June 30, 2017) was the revolutionary night for the Indian economy as Goods and Services Tax (GST) came into force at midnight, amid a historic midnight session in the Central Hall of Parliament. President Pranab Mukherjee, Prime Minister Narendra Modi, and Finance Minister Arun Jaitley addressed the gathering, before the President and the Prime Minister pressed a button to mark the launch of GST.
GST, on one hand, has created an ease of business for companies by bringing all state and central level levies and taxes under one roof on the other it has increased the compliance.
1. One Country, One Tax
Before GST come in force, one has to calculate different taxes which would make the process complex and burdensome. But with effect of GST, where all indirect taxes are subsumed into one single tax making tax calculations simple with less paperwork. And this will largely benefit the startups catering the software industry. Previously, VAT, service tax and excise, all the 3 or at least first two are applied on software products or service which will now reduce to single tax.
2. Ease In Doing Business With Single Registration
Earlier startups have to register again and again for different taxes or different states. But now with GST coming into effect, startups have to register only once on GST network and they can do business in any part of India without any hassle, making India a common market for startups and leading a way for expansion of their businesses.
3. Startups Eligible For Higher Threshold Limit
The growing businesses which are at nascent stage that is with an annual turnover of less than Rs 20 lakh are out of the tax net under the GST regime. Previously, threshold limit of service tax was 10 lakhs while the threshold limit of VAT varies from 5 lakhs to 20 lakhs in different states. But now, with increase in the threshold limit under the GST regime has bring a relif to budding startups. Startups are now eligible for higher threshold limit of 20 lakhs (10 lakhs in case of North East states). Not only this, startups whose annual turnover is less than 50 lakhs can opt for composition levy at a lower rate.
4. Lower Logistic Cost
GST will prove to be a much needed boon to e-commerce websites. As per the CRISIL report, GST will reduce logistics cost by 20% helping in reducing the cost of e-commerce startups. Reduction in logistics cost will also lead to more business for logistics companies.
Hassle free movement of goods in a common market will help startups in delivering goods early to customers since state border checks used to delay the movement of goods from one state to
another. This will also bring down the inventory and storage cost of startups.
5. Reduced compliance cost
With GST coming into effect, the overall compliance cost will be reduced as now there is only one tax and provisions related to act to comply with. GST network will also ensure transparency in calculation of taxes and input tax credit.
These are the few benefits startups will have due to GST coming into effect. But with every new policy coming into effect, there are few challenges and drawbacks associated with it.
