With their arms widespread, Indian startups have greeted their guardian angel: GST. These institutions have craved for such simplified regulations of business for a long period now. The introduction of GST is supposed to bring some solace to these businesses. The various startups are of the ideology that this tax reform will end up streamlining the taxation system in the longer run and would also contribute significantly in reducing cross-border corruption. To give you a gist of GST, it is a “One Nation One Tax” regime which will subsume various indirect taxes into one. This way it is anticipated to bring in economic integration while organizing the procedure of indirect taxation. There are multiple reasons why Indian startups are favoring GST compliance. If you take a glance at the overall picture, then there are numerous factors behind the excitement about this new tax reform. Some of these reasons are highlighted below.
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EASE IN BUSINESS COMMENCEMENT:
Under the guidelines of the past system, there was a mandate that every business has to have a VAT registration from the sales tax department. That obligation has been a headache for the businesses operating in multiple states as they have to comply with multiple procedures and fees in each state. GST compliance is expected to bring uniformity and transparency. The major advantage for startups is that the new reform provides a centralized registration system. This integrated system would be immensely helpful in starting business and expanding it across various states of the country.
SIMPLIFIED TAXATION REGIME:
It is known to all that startups are mostly running short on budget. With monetary restrictions it is difficult for them to comply with various regulations confining to excise duty, VAT, etc. As GST will subsume all of these various indirect taxations, this will reduce the time and money invested in cohering to tax compliance to a great stretch. This way it will become easier to file returns and pay one kind of tax in comparison to the previous structure which involved multiple tax structures across various states.
A HIGHER THRESHOLD FOR REGISTRATION:
Another fortune which is brought in by GST is pertaining to the registration procedures. In the past scenario, all the businesses having a turnover of more than INR 5 lakhs are supposed to get themselves registered for VAT and have to pay it in different states of operations. Post-execution of GST this slab would be exceeded to INR 20 lakhs. This means that GST compliance norms would have to be adhered to only by those companies who are falling under the bracket of more than INR 20 lakhs.
A BLESSING FOR ONLINE STARTUPS:
Without a doubt, GST has showed out to be a blessing for all the startups operating through the e-commerce platform. There are innumerable startups which are operating in the cyberspace and are providing products by means of the internet. The previous taxation regime had been creating hurdles for them as they had to pay various taxes in each state. However, GST execution will set them free from these hurdles.
REDUCTION IN LOGISTICS COST:
Introduction of the new tax regime means that the various small border and interstate taxes will be subsumed under GST. The consolidation of various taxes into one head would lower the prices of movement of goods across states while making it less time consuming. This would provide a major advantage as it would help in building the logistics system more competent and efficient. As the flow of goods would become more skilled, companies will have to invest less in stocking up piles of goods in warehouses. This would drastically reduce the cost of warehousing and stocking.
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There are various arguments which are clouding the sky of GST. Aforementioned advantages, along with others, are being spotlighted by those who are favoring the revolutionary tax reform. The critics of GST hold different views and are raising arguments in the direction of revenue losses which the states might incur. However, the Centre has taken this into consideration and has made a provision to redress states for any losses borne by them as a result of. Hence it won’t be wrong to decide that GST’s positives outweigh its negatives and it is surely going to reform the way startups were operating.