The most trending issue in India is how GST will affect the market and people with its new tax policy and relief. Previously, GST has a complex tax system where it becomes difficult for new startups to cope up and manage various kinds of direct and indirect taxes but after this new tax reform policy, conditions will change the indirect taxes and provide better functioning in the market. Basically, GST is an Indirect tax which will bring most of the taxes under a single tax. GST will remain the same and equal for everyone, it doesn’t make any discrimination and make India a common network. GST will replace all the taxes imposed by central and state government. Taxes will be paid after adding VAT on every stage, so the consumer has to pay the GST which is charged by the last dealer in the supply chain and that will include all the charges.
The Impact of GST on Startups
- Lower Tax Burden
As per the current taxation policy, businesses which have a turnover more than INR 5 lakh have to pay Value Added Tax (VAT). After GST implementation, this limit will be increased to INR 20 lakh and for the turnover less than 50 lakh, tax will be charged at a lower rate in the composition scheme, so that they can save more money and use it to grow their business. This will make a huge difference in reducing the tax burden for the startups.
- Simple Taxation Process
Taxation process will become much simpler, and businesses don’t have to pay various taxes to different people. GST includes all taxes such as VAT, Excise, Service tax, etc. after imposition of this policy businessmen don’t have to register under the different tax, and they just have to pay through a single platform. New reform will save lots of time, energy and cost of filing tax.
- Reduced logistic cost and time
Currently, the movement of transport vehicle gets slower across the states because of state border tax raises and authority is also checking the goods and charging high amount of transportation cost. This will be changed after imposition of GST policy and cost of interstate transportation reduces and movement of goods will become easy, fast and cheaper. It will enhance the profitability of the business and support the manufacturer to provide services in other states.
- Benefit for Manufacturing Startups
The new GST regime is a boon for startups, this will reduce the tax and it will lower the cost of production which will make the goods more competitive and more resourceful. GST will help the manufacturer by reducing the time and cost of transportation and the supply chain will become more efficient and strong which is again a positive sign for the manufacturing industry.
- Online Startups become simpler
Online startups are holding the market so tightly and providing their services through a single platform and currently, there is some complication in tax laws state wise. GST will allow the free movement of goods and it will lead to more efficiency in the whole process.
- Single Tax for Products and Services
Businesses that deal in both products and services, like restaurants currently pay VAT and service tax separately. After GST, they will have to pay a single tax. It will save the time and energy to calculate the different kinds of taxes and make the process simpler and much efficient than now.
GST will be implemented from 1st July 2017 and estimated that GST reform will increase the GDP by about a percentage point and this is a huge step towards development. The government should start more such programs for the benefit of country. The free movement of goods from one state to another state without any paperwork, state tax and stopping time, of hours, on state borders will make life much easier. Government, businesses, and consumers all will be benefited by GST.