Whether you are a start-up or an established business in India, it is impossible to have not heard of the new tax called as the Goods and Services Tax (GST). With the aim of streamlining the previous tax structure, the govt. has integrated all previous indirect taxes to form the GST and made tax collection more transparent.
- There is no more cascading of taxes. GST is one indirect tax for the whole country. It is levied at every stage of value addition. Businesses can claim input tax credit.
- Taxes for both state and centre will be collected at the point of sale and charged only on the manufacturing cost. Since prices are likely to reduce, there will be a rise in the consumption leading to more production and growth of the business.
- GST results in easier interstate movement of goods. Every business which requires moving goods around the country previously needed to maintain multiple warehouses to reduce tax costs. This will not be necessary because GST has removed entry sales tax.
Impact on Services
Previously, all service providers needed to register only once but, in case of GST, they will have to register in every state where they operate.Though this may have a negative impact on some companies, yet the individual state governments favour this measure to get a portion of revenue.
In the previous tax regime, there was:
- General tax rate of 15%.
- Single centralized registration system for payment of service tax.
- Filing up to 3 service tax returns in a year.
- Impediments to get input tax credits for some services.
- Tax rate from 18 to 20%.
- Must registration in every state.
- File around 37 returns per state, every year.
- Input tax credit can be claimed on all types of GST.
- Issues of compliance-tough to keep track of all invoices.
- Increased cost: makes services less attractive to customers.
- GST has to be filed 3 times per month. Invoices must be paid on time to keep the business running. Take help of software for GST India.
Impact on Start-Ups
GST is aimed to help start-ups and entrepreneurs.
Previously, start-ups faced:
- Compliancewith numerous taxes like VAT, Service tax, CST, etc.
- Taxes at every state border, making logistics difficult.
- Need to go to tax offices to file taxes.
As part of GST:
- Need to register for GSTonly when turnover exceeds RS. 20 lakh.
- Deal in goods or service or both and pay only IGST.
- Do filing of tax returns by online means: registration, payment, etc. via one portal.
- Ensure compliance: Ensure all invoices are kept properly, and tax returns are filed on time.
- Planning ahead for GST is crucial
- GST returns must be field 3 times per month; pay bills on time.
- Start-ups are able to adapt to new technology easily, but they must find the right fit.
These are some examples of how GTS impacts important sectors of the economy.