Goods and Service tax is coined as a Big Tax reform in India. Since the GST was launched in India, it has shown a huge impact on the economy of a country. As You Know Good and Service tax or GST, In short, is a single tax that is levied on the supply of goods and services In India. GST is said to bring the idea of “one nation, one tax” in the country. Now we will look at Impact of GST on startups in One year. You Know startups are small companies that are formed to bring new products and business models to the Marketplace. Why it is very essential to study the impact of Gst On them is because startups have potential to solve the Unemployment problem in India.
What are the Positive impact of Goods and Service tax On startups
- Startup owner has enjoyed the ease of doing business under GST regime, As under gst all state and Central taxes are combined into one so startup does not need to register themselves under different taxes, only single registration is sufficient.
- The GST registration is done online that has increased the ease of getting GST Registration in the country.
- The startup where they are dealing in goods and Services have found GST to make compliances very easy for them when compared to VAT and Service Tax. Cost Of compliance has also reduced Under Goods and Service Tax.
- Under GST Regime the threshold limit is Rs 20 Lakh, that Exempts Startup and Small business from getting GST Registration.
- Good and Service Tax Has also reduced the cost of Logistics, as Earlier any company who is using Truck to transport their Goods have to octroi tax which use to Vary from State To state. Now, After GST All taxes are Combined and That has reduced the Tax Burden.
- GST Has Eliminated Double taxation as Gst Is Levied on the Fully produced goods and No value addition takes place.
- GST has Reduced Tax Evasion as invoicing has become Very easier as Goods and Service Tax is levied systematically and evenly. hence it has made very easy to take advantage of Tax Incentives
- After One year amendment in Gst Registration is now easy, That has added advantage to the Startups.
What is the Negative Impact Of Goods and Service Tax On Startups?
- Startups That Belong to Manufacturing Sector Have faced an increased Tax Burden as Under GST The Turnover limit is reduced to Rs 20 lakh.
- The GST Registration and Filling is done online through GST Registration Portal and If startups do not have access to the proper Internet and other Technical aspects then this can cause a huge problem for startups.
- Gst Is Proving to be troublesome for the freelancers as the freelancer have to mandatorily register themselves under GST.
- Also, The E-commerce operator is also not exempted from GST and Have to get Gst Registration, which will increase tax Burden on e-commerce operators as well.
- There is 36 return that has to be filled in GST, The startup has to appoint an Accountant or ask a third party to help in return filing which increases cost in the business.
- Startup Under Gst Has suffered blockage in terms of Working capital as they have to keep their funds with the Tax Department.
- If The startup That is exempted from GST, Supplies goods to Buyer that is registered under Gst, then Buyer has to pay the Gst Which turn out to be Bad Debt for the buyer under Gst.
- GST Will also create A Mismatch in society as the tax levied on luxury goods and normal goods are same. For Startups, it is not very easy to adapt to GST Laws.
The large Scale Businesses have shown a positive response to GST Regime but the Startup and Small and Medium Scale Businesses are finding it very hard to Adjust to GST Regime. The Startups as you know some of them have limited supply of Funds and Resources which sometimes make it hard for them to ensure the full compliance toward GST Law. But Time to time government is bringing schemes for startups that will help them to cope up with difficulties that they face with Goods and Service Tax.