What truly is the biggest indirect tax reform since 1947, GST is expected to bring about an economic integration of the Indian economy. As a result of GST. The tax payers will pay one consolidated tax instead of a plethora of taxes including State Value-Added Tax (VAT), Central Excise, Service Tax, Entry Tax or Octroi and a few other indirect taxes.
Ease of doing Business
The Government of India is providing adequate thrust for startups to flourish through a host of policies and exemptions. GST is surely a step in that right direction. For a startup, the focus should be on business growth and expansion rather than on compliance with cumbersome tax procedures. In line with the Government’s ‘Ease of doing Business’ theme, GST would assist businesses in multiple ways starting with the registration process. With all processes being moved online and the concept of deemed registration, starting a new business would now be an instant process.
GST will benefit those Startups that have multiple branches across the country by bringing about uniformity in processes and centralized registration. Considering the higher rate of failures in startups, closing of registration and winding operations also would be easy under GST.
Removal of hurdles
Lack of updated tax laws has been creating regulatory hurdles for the New age startups in areas such as e-commerce, digital payments, online services as the laws are not in consonance with the latest business practices as the mix of Goods and services (Goods + Services mixed at varying proportions) makes it difficult to define taxability under the prevailing VAT or Service Tax laws. The Issues faced by Flipkart and Amazon with VAT authorities of various state governments stands as a testimonial to this phenomenon.
Businesses like restaurants, which fall under both sales and service taxation, have to calculate the VAT and service tax on both items separately. GST will not distinguish between sales and services, making the process simpler.
Enabling Smooth CashFlows
Cash flow is the lifeline of any business and in the current system there are multiple hurdles for smooth cash flows. CST on interstate sales is non-creditable, input services cannot be set-off against VAT liability and vice-versa, refunds of credit is cumbersome and time consuming.
Simple taxation and Joy to Startups
GST is aimed to address these issues by providing automated setoff, refunds, input credits and elimination of statutory forms. For software startups, the biggest advantage would be application of single GST tax. Currently VAT, Service Tax and Excise, all the 3 or two (VAT + ST) taxes are applied on software products and services leading to confusion besides causing price inflation due to cascading of taxes. GST will make the requirement limit for registration higher, and, further to it, businesses with turnover between Rs 10 to 50 lakhs could be taxed at lower rates. This will bring rejoice to newly established start up and small businesses.
Considerable Savings in logistics cost and time
As per CRISIL analysis, GST can reduce logistics costs of companies producing non-bulk goods (comprising all goods besides the primary bulk commodities transported by railways – coal, iron ore, cement, steel, food grains and fertilizers) by as much as 20 percent. Interstate movement will become cheaper and less time consuming across States due to elimination of border tax and check post issues.