GST Advantage for Start-ups and Small Businesses

By this time all of you must be aware of the monumental change in our tax system that has come about with GST. The GST Bill was passed in the Lok Sabha in 2015 and it was implemented from 1st July 2017. With GST one must be aware of the fact that anyone who provides goods and services should pay tax. To have a better understanding of GST it can be said that it is a value-added tax levied at all points in the supply chain. It is the end consumer who bears this tax at the end of the supply chain. However, the introduction of Goods and Services Tax is aimed to simplify the indirect tax structure at both the Center and at the State levels. It will also remove the multiple layers of a complex tax system that exists in India.

The question here is will GST advantages for Startups and Small Business? The good thing about GST is that it is a lot more democratic. GST will not only give certain leeways to small businesses but it will also bring them under an organized sector. This, in turn, will help them gain benefits in the long run.

Let us have a look at some of the advantages that GST for Start-ups and small businesses.
GST will improve ease of business: Under the existing tax system of India, it was mandatory for businesses to undergo VAT registration from the state’s sales tax department before they can start on their own. The result is that it can be quite difficult to get VAT registration from every state because each state in India has different VAT regulation laws. GST, on the other hand, will not require different VAT registration. Rather every process will become centralized and there will be no need for businesses for different VAT registration based on the boundaries of the state. It will be enough to register under GST and start on their own.

GST Advantages for Startups and Small businesses

GST brings about the integration of multiple taxes

Presently goods and services are taxed under the VAT regimen that is implemented by the State Government and the services, on the other hand, are taxed under the service tax regimen of the Central Government. Each state in India has different VAT rates, VAT regulations, and VAT procedures. This leads to quite a lot of complications. Besides VAT and service tax there are various other kinds of taxes as well as the Central Sales Tax, Additional Customs Duty, Purchase Tax, and Luxury Tax and so on. With the implementation of GST, all these taxes will be subsumed into a single tax making it easier for small businesses and start-ups.

GST exemption for small businesses and start-ups

As per the current scenario businesses which have turnover more than 5 lakhs need to have VAT registration and VAT payment as mandatory. However, such multiple VAT registration across states is bound to be confusing. With the GST implemented there will be no such problem. This is because businesses that will have a turnover of fewer than 20 lakhs will not have to register for GST nor will they have to collect it. Similarly, businesses with a turnover of 20 and 50 lakhs will have to pay GST which is far lower than the existing GST. The result is that it acts as a huge incentive for all small businesses and start-ups as they will neither have to file nor collect GST.

To be precise GST will bring about overall improvement for small businesses and start-ups. With the introduction of GST, there will be no difference between goods and services. Moreover, businesses will be spared from various tax regulations across states. At the same time, the invoicing process will also easier for business as there will be no difference in rates. GST is aimed at providing simplicity and reduced compliance for small businesses and start-ups. However, one of the biggest advantages of GST for small businesses and start-ups is that they will have a level playing field with their larger counterparts. Hence, it is expected that GST will certainly give an impetus to all the budding businesses in the country.