REVAMP OF THE STARTUP INDUSTRY POST THE ADVENT OF ‘GST’

REVAMP OF THE STARTUP INDUSTRY POST THE ADVENT OF ‘GST’

REVAMP OF THE STARTUP INDUSTRY POST THE ADVENT OF ‘GST’

REVAMP OF THE STARTUP INDUSTRY POST THE ADVENT OF ‘GST’

REVAMP OF THE STARTUP INDUSTRY POST THE ADVENT OF 'GST'

The changing grounds of innovation and employment in India have been a significant part of the mushrooming scene of the new ventures at present. India is ranked number third with more than 4000 currently among the nations around the world with the maximum number of startups. 

It has victoriously skyrocketed a number of companies to the well deserved unicorn status i.e. startups being valued at $1billion or more, crucially playing a boss in bringing the unorganized sector into the section of organized sector.

Though the introduction of GST routine is not completely helpful for startups, it definitely is said to help the growth. Let's take a tour of the pros and cons of GST and its impact; 

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ADVANTAGES

The infancy stage: There were a number of tax compliances that had to be followed earlier to start a new business, but after GST coming into the picture all the sales and indirect central taxes have been consolidated. Presently the paperwork has been reduced and the registration is single as well.

The time consumed in this process can be now devoted to more constructive means in the business. Any business that has a turnover of less than 20 lakh does not need to register for VAT which was not the case earlier. Presently all the startups and small businesses are exempted from a structure of this nature.   

Cost of services: The reduction in the tax procedures after the introduction of GST has majorly helped in multiplying the inter-state delivery of goods and services all throughout the country.

From state to state there was OCTROI tax that had to be paid before crossing the borders which would eventually increase the expenditure of the business.

Presently there has been a uniformity bought in the same tax all through the country. The entire process of registration and payment of tax has been made available online. 

Billing and Taxes: There were taxes levied on goods multiple times which eventually swelled the price they were paying for the goods in comparison to the original price.

The introduction of GST has eliminated such taxation by valuing tax on only the goods produced as the final product. There has been a uniformity bought in the application of taxes resulting to which the distinction between the goods and services has been evaded. 

There are a number of advantages that can be availed in terms of tax incentives. Difficult interstate movements, complicated taxes, cost of compliance, and more have all come to an end after GST came into being. Under this regime, there is only one tax to be paid to ensuring that the whole procedure is centralized. 

DISADVANTAGES

Glitches in taxes: In the prior years the excise duties were paid by the business that extracted a turnover of INR 1.5 crore but since the GST has reduced the number to 20 lakh, small businesses have also come under its cap.

The tax burden on the manufacturing startups has hence increased. You will automatically not be eligible for Input Tax Credit if the supplier has not filed and paid their taxes.

The major drawback about this is that if in the supply chain even one of the link has failed, it will result in great damage to the company. In the initial phase the cost is endured by the startup but later the TCS (tax collected at source has to be paid by the owner and they would receive a refund only after filing the returns. 

Challenges of technology: One of the major problems in a country like ours is technology and this has impacted the process of GST and the startups because the complete process has now been shifted online. And this online process may not be completely successful due to lack of technology or even the basic knowledge of it. 

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Blocking funds: Since the GST routine has been introduced, the funds have to be uploaded by the startups in electronic form with the tax department which will lead in blocking of funds substantially.

A startup will have to basically set aside a portion resulting in choking of the capital in the input tax credit system. If the goods are transferred from one business that does not need to pay GST, to another that is obliged to pay, in this case, the buyer is the one who would be taking care of all the taxes.

They have to self-invoice and then upload the same on the GSTN while they file their return. This is nothing but just a bad debt that has to be paid by the buyer. 

Compliance Parameter: If there is a prospective buyer, they will be at the disposal to check the GST compliance rating and decide about the credibility of the company like the credit score. The guidelines are extremely stringent of the compliance and come at a certain bandwidth and cost. 

Freelancers: If the business person does not have a fixed place to do the business they have to enroll themselves as a casual taxable person under GST. It becomes mandatory for the person to do the registration because they do not come under the bar of 20 lakh being freelancers. 

There is no sector that is not dealing with the pros and cons of GST. We are running in the period of transition, it will face its ups and downs. There will be a lack of technological skills and implementation but there also will be an overcoming from it. 

Startups will face a few problems but will always be on the fancy to be saved by the experts in the business. The experts can always lend a hand for registrations and filing letting the owner concentrate on thriving in the business better. 

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