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GST Rules For Startups In India

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In a move to put all the taxes together under one roof, the Government of India implemented GST, the Goods, and Services Tax, which came into existence on July 1, 2017. 

A single tax on goods and services, GST may be one of the most far-reaching economic reforms in India’s history. Previously, there were several taxes that consumers paid on goods that were used to provide the services they valued. But under the new law, the government now includes all those taxes under one umbrella called GST or Goods and Service Tax.

While this move helped simplify the earlier taxation process, many people seem to have no idea about what it actually is.

In order to help those people, this article aims to provide an introduction to what GST is, how it will benefit the Indian economy, and how it majorly impacts the businesses in India. 

So, let’s begin!

# What is GST?

GST is an indirect tax applied to the cost of goods and services. It adds to the overall cost of the products/services offered by a business. When a customer makes a purchase, the GST is collected and then later forwarded to the government.

The GST system has three main components:

  1. The Central Goods and Services Tax (CGST)

2. The State Goods and Services Tax (SGST)

3. The Integrated Goods and Services Tax (IGST)

Earlier, businesses had to go through the registration and the taxation processes of several taxes like Customs duty, Excise duty, Service tax, Entry tax, etc. Now, it is all combined into a single tax, GST.

# Benefits of GST

The GST has brought about a uniform tax structure across India, which means that goods and services are taxed at a fixed rate.

It is an efficient way to collect revenue from indirect taxes because it reduces the cost of doing business for companies that operate in more than one state. It also simplifies the input credits process because it applies to all states uniformly.

Following are some of the benefits that GST brought into the country.

  • Ease in Starting a Business

Earlier businesses had to go through cumbersome registrations and compliances of indirect central and state taxes. Now, GST has simplified the process to one single tax. Hence, reducing the paperwork.

  • Decreased Cost of Logistics

The logistics industry has improved. When earlier inter-state delivery of goods and services involved high expenditures with varied state taxes (different from state to state), GST has brought uniformity as one single tax. 

  • No Double Taxation

Earlier, taxes were included at every stage of the movement of goods/services. But now, with GST, a single tax is included with the finally produced goods. Thus, eliminating double taxation.

Now, let’s see what rules under GST will benefit the startups in India.

# GST Rules For Startups In India

With the new tax structure in place, it is time for us to find out whether GST would become beneficial for startups or not. Here are some GST rules for startups in India. Let’s get started!

  1. Higher Threshold For Registration

The VAT structure required businesses with a turnover of more than Rs. 5 lakhs to be registered under the law. However, GST has eased the process by raising the limit to a turnover of Rs. 20 lakhs. This comes as a piece of great news for small businesses, especially startups.

2. Online Registration and Filing of GST

The entire process of registering and filing returns and payments of GST is online. Thus, relieving businesses from running around tax offices to get registrations for multiple taxes. All thanks to GST, the time consumed in the paperwork can now be saved.

3. Great Move For E-Commerce and Online Startups

For businesses that provide goods and services through online platforms, GST comes as a boon. Now, they will not be required to register for separate VAT laws during the inter-state travel of goods. All that would be put under a single and uniform tax, GST. 

4. Tax Load For Manufacturing Startups

Earlier, under the existing excise laws, manufacturing businesses with a turnover of more than Rs. 1.50 crore only were required to pay excise tax. Now, with the implementation of GST, the turnover limit has been reduced to Rs. 20 lakhs. This comes as bad news for manufacturing startups. 

5. Service Startups To Get Tax Credit

For the startups in the service industry, the implementation of GST has come with relief. The service industry charges a service tax to their customers. Under GST, they can include the VAT paid(on their purchases) with the service tax to their customers on the sales. 

# Conclusion

The government needed to implement a system such as GST that will be easy for the public to understand and comply with. It should also be progressive over time so that the burden does not shift from one group to another, as this may lead to greater discontent among the population. GST was much needed!

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