How Does GST Impact the Indian Start-up Ecosystem

How Does GST Impact the Indian Start-up Ecosystem

How Does GST Impact the Indian Start-up Ecosystem?

Even after two years of it’s launching, people are still curious about GST and Startups sector. The GST or the Goods and Services Tax is an indirect tax imposed on the supply of goods and services in India. It is a comprehensive tax because it includes all the indirect taxes except a few of them. It is also a multi-stage tax system as it is imposed at every step of the production process. This reformed tax system of GST is welcomed in the nation by all. This idea of “One nation, one tax” has been a revolution for all the businesses and stepping in the arena. The GST has integrated all the indirect taxes into one and simplified the tax system. Here is how GST is affecting the Indian Start-up ecosystem.

Simpler Taxation-

Before the GST was implemented, there were different tax systems in different states and it used to be a strenuous job for the businessmen to adhere to the different tax systems. But the implementation of GST all the indirect taxes are now included in tax to be paid by everyone. This has helped the start-ups to concentrate more on the main work and prevented the complex calculations and the tax documents.

Easy Registrations-

Prior to the GST, the businesses had the VAT registration system which was compulsory for all the new businesses. But if a business is operating from various states, it has to follow the different tax procedures of each state and pay different fees in each state. But under GST there will be uniformity in the registration. It will have centralized registration for the companies which will enable them to do business in multiple states with only one license, as long as the companies are paying taxes. This way, the start-ups can start a business and run it in multiple states easily. It will help them to expand their businesses and increase their reach in the country.

Even after two years of it’s launching, people are still curious about GST and Startups sector.

High Tax Exemptions-

The organizations with a turnover of INR 10 lakhs to INR 75 lakhs can opt for the VAT Composition Scheme. The scheme had different terms and conditions and did not prove to be affordable to all the businesses. However, with the implementation of GST, the organization’s income not as much as INR 10 Lakh will be exempted from the GST and the organization’s income between INR 10 lakh to INR 50 lakh will be taxed with lower rates. This will not help the new businesses, but it can help them to contribute to cash the saved money on taxes.

Improvement in the efficiency of logistics-

The movement of goods and the generation of a common market in the nation will help to have much greater efficiencies in the logistics department of the companies. This has helped to relieve the two main pain points of the companies. One is the check-in delay of the delivery of the goods. This delay resulted in enhanced product cost to the end customer. With the help of GST, these delays and similar insufficiencies can be eliminated and it will result in making the interstate movement of the goods easier and cheaper. GST will also help to create an uninterrupted movement in the supply chain and the cost of maintenance of high stocks will also be reduced.

GST and Startups in India can bring revolution in the business industry.

What does GST mean to the start-ups?

The implementation of GST is a sure game changer for the start-up ecosystem. It is mainly because the companies whose turnover is less than INR 10 lakhs will be exempted from the taxes. The other key benefit is that the businesses will now be able to expand their businesses in other states without having to pay extra fees, as GST will enable them to practice everywhere with one license. The filing of the tax can also be done under just one tax rather than different tax systems of different states. The automation, logistics and retail companies have benefitted the most from the GST. Other sectors such as the real estate and manufacturing sector will also indirectly benefit from the GST.  

Earlier, the manufacturing units with a turnover of less than INR 1.5 Crores did not have to pay any duty or even get registration under the excise. But now with the application of GST, the margin is reduced to as low as INR 20 lakhs and this has affected the start-ups and small businesses by impacting their bottom line. The businesses that are into e-commerce are also required to register even if their turn over is less than INR 20 lakhs.

To conclude, we can say that even if GST comes with its negative points, the benefits outweigh them. The GST is considered as the most friendly tax reform in India. It will bring transparency, efficiency, and simplicity in the operations of the businesses. It will benefit the start-ups in almost every way, and they should expect a clear sky for their venture as long as GST is concerned. Together, GST and Startups in India can bring revolution in the business industry.

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