The announcement about passing of the Goods and Services Tax or the GST bill as is referred to is something everyone seems to be euphoric about and well, it is news worth the noise. The GST bill that was first recommended in 2003 by Kelkar Task Force, was mooted in 2006-07 budget, was supposed to get implemented in 2010, is now finally seeing the light of the day in 2016 after 13 long and painful years. Was it all worth it?
This key change in the arena of indirect taxes hails a significant reform, helping the nation in its journey towards economic integration. The revised process promises to make the process of taxation much easier and cost effective by clubbing together plethora of taxes including State Value-Added Tax (VAT), Central Excise, Service Tax, Entry Tax or Octroi and a few other indirect taxes.
The complications that have been faced due to multiple taxation points, is something that has been debated for quite some time. Now, with new recently introduced initiatives like Startup India and with the aspiration to make India as one of the geographies that nurtures entrepreneurship and innovation, the move around implementation of GST is the need of the hour. Although it is to bring news worth celebrating for all the businesses, it is all the more so for the budding start-ups of the country. And for ah! Ventures – arguably the only pro-entrepreneur enabler in the country – on a quest to reduce the mortality rate amongst startups, it’s music to our ears.
Here’s why GST brings news to cheer for the startup community at large:
Ease of Business:
The array of taxes that is currently to be paid for is undoubtedly a major hurdle in the life of an enterprise. Especially so for the ones interacting with varied states, thus engulfing them in the nitty gritties of the regulation changes per state. The GST reform is to bring about a systematic approach and a centralised way of structuring to these taxes making it operationally smoother for the new businesses to thrive.
New Exemptions and Slabs:
As opposed to the current structure where businesses with turnover of more than Rs 5 Lakh have to get VAT registration and pay VAT, this reform shall increase the limit up to 10 Lakhs and the businesses with a turnover of Rs 10 to 50 Lakhs shall be taxed at a lower rate.
Businesses in Sales and Services:
Businesses currently in the area of services and sales have to face a tough time paying differentiated taxes. With the VAT being calculated separately, it’s an operational nightmare to calculate the complexities. The reform shall do away with distinguishing between sales and services, thus letting the entrepreneur pay taxes on a holistic common ground.
Logistical Ease:
Given the fact that most of the startups are expanding beyond the mere boundaries of confined localities, and regularly engage in inter-state business transactions. Although logistically the operations have not been a cakewalk given the repeated screening at every point. Making the inter-state business tax neutral, guarantees at the onset a new turn of simplified transactions. Based on the CRISIL analysis report, this shall cut down the transport cost of bulk commodities by around 20%.
This wake of new reforms is much more than mere simplification of taxes but rather is a way forward into making India a key player in ease of doing business. Although the implementations and the positive results of the bill will take some time, the government is finally acknowledging and embracing the economy of the 21st century.