Legal procedures to start a proprietorship

By Sandeep Gupta on August 3, 2014 6 Comments / 1704 views

Hi All

I am in the process to start a proprietorship based in Delhi which aims to sell home automation products. To start with, our first aim to launch a smart switchboard. So, I believe it shall fall under both electrical and electronics. Now, to receive online payments in the name of the firm, I need to open a current account with a Bank. The banks need a proof of government registration.

So, my question is do I need to take VAT or Service tax registration?

Does any liability accrue immediately on registering with Government? I believe in Delhi, one is exempt upto a limit of 20 lakhs for VAT.

Is there any other way to open a current account?

I am starting this from my home currently, is this ok? The manufacturing etc has been outsourced.

TIA

Br,

Sandeep

Comments

Sandeep Gupta

6 Comments

asha chaudhry August 4, 2014, 5:18 am

sandeep – there are quite a few similar posts in ASK on trhs. i suggest you use the search engine as well – you might get some answers.
Charu Zelawat August 4, 2014, 6:07 am

Yes Sandeep,if any liability of VAT or service tax you should get it registered.Also,as of now get your home’s address register under the shops act then latr you can change the address in certificate.
Amit Shroff August 6, 2014, 3:34 am

Dear Sandeep,

You can look at any government proof, including registration with labour department, import/export licence etc, with VAT/Service Tax you would incur charge and liability for taxes, which include filing of return etc. Additionally once you take these you will have to charge VAT or Service TAX. Service TAX would be paid on services offered by you, like installation of these devices, AMC, training, maintenance etc.

I operate from Noida, but my service tax is registered in my residence address. No issue with it.

Regards,

Amit
9811122212
https://www.72interactive.in
Sandeep Gupta August 6, 2014, 4:15 am

Thanks for replies. As per a link that I found:

https://yourstory.com/2012/09/service-tax-vat-or-cst-an-overview-taxation-basics-for-startups/

I would need both CST and VAT as I plan to sell it across country and currently the services would be free of cost. Talking to a few SME entrepreneurs, it seems it becomes troublesome once you apply for CST/VAT as

a. return has to be filed each month

b. It is subject to lot of scrutiny related to warehouse, factory, child labour etc

Would that mean that I need to invest in getting some space on rent for warehouse etc?
Amit Shroff August 6, 2014, 4:30 am

I suggest you should speak to a sales tax consultant!
Manish Sisodia August 6, 2014, 4:53 pm

Hi Sandeep,

I was also going through the same dilema and had posed not exactly the same question but somewhat similar set of questions relevant to my startup.

What I have learned is that its better to start on a clean slate i.e. register both for VAT & Service Tax. Although both have exempts upto certain turnover limits and these differ from region to region. The catch is that the moment you try to scale up and you cross the exempt threshold you are liable to be charged for all the earlier transactions for which you haven’t charged your clients.

Although I too am starting from my rented home in Navi Mumbai but I am getting the entity registered with all the respective departments.

These are my observations !!

Rgds.

Best Wishes for your venture.