The GST law has been in talks for many years, but it’s only now that it’s finally going to be implemented in the nation from July 1. The business industry awaits this day, although there is still a lot of confusion and uncertainty.
Regardless of how everyone feels about the new taxation regime, one thing is for sure that it will be beneficial for the businesses and the consumers both. However, startups and micro-enterprises are going to be at a big advantage because of the following:
Starting Business Made Easy
Under the current system, the troubles for startups and small business owners begin from the first step itself, which is registration. The business owners have to pay a number of visits to the Sales Tax department for VAT registration. Also, if the business has multiple branches in multiple states, then getting VAT registration can easily become a nightmare due to different rules and regulations followed by different states.
GST is here to change all the problems mentioned above. It is a centralized system that will allow aspiring entrepreneurs to register their businesses online. They can also file returns, claim input tax credit, send invoices, etc. through their GST account. Thus, there will be less room for corruption and tax evasion.
One Big Central Market
A mobile phone of a particular model is today sold at a different price depending on which state you buy it from. This is because the rate of VAT and other taxes can vary in different states under the current system. The brick and mortar stores have thus suffered a lot due to this as they are unable to match the prices of the products sold in the states that have lower tax rates.
These businesses don’t only have to compete with other businesses that could afford to offer low prices but also with imports that often cost less due to the lack of cascading effect of taxes. Thus, GST will promote the growth of domestic companies and startups to do business without fearing the businesses based overseas.
For the most part, GST will be helpful for SMEs and startups. However, there will a few challenges too. For starters, businesses that supply both goods and services and have an annual turnover of less than 1.5 crores may have to face compliance issues due to the nature of their business and deal with both state and central administration. Also, the threshold level for GST registration is 10 lakhs for the North-Eastern States and 20 Lakhs for the rest of India. Although this is better from the previous 5 lakhs and 10 lakhs respectively, it will still cause startups and small businesses owners to pay a high tax.
All in all, while there are a few hardships that GST will bring to the table, it will be a welcoming change for the entire business industry nonetheless. The specifics of the law such as exact rate for different product and service categorized, however, will be finalized by the GST council soon.