GST Advantages for Startups and Small Businesses

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The Goods and Services Tax (GST) – GST Bill was passed in Lok Sabha on 6th May, 2015. The concept of GST in India has been mooted and evolved for over a decade now. With the GST Bill passing the Lok Sabha, it is now slated to be presented to the Rajya Sabha. Once cleared by the Rajya Sabha, the Bill would set in motion the rollout of GST in April, 2016, transforming India’s indirect taxation system. In this article, we review some of the major advantages of GST implementation in India for startups and small businesses.

GST Overview

GST or Goods and Services Tax is a value added tax, levied at all points in the supply chain with credit allowed for any tax paid on inputs acquired for use in making the supply. Therefore, it is the end consumer who bears this tax as the last person/entity in the supply chain. The introduction of GST in India is expected to result in major simplification of indirect tax structure at both Centre and State levels – replacing the multiple layers of complex taxation currently existing in India.

GST will Improve Ease of Starting a Business in India

While starting a new business in India, businesses currently have to get VAT registration from the State’s Sales Tax department. Since, each State has different procedures and fees for VAT registration, it is hard for businesses operating in multiple States to obtain and maintain compliance with VAT regulations.

With the implementation of GST in India, the procedure for GST registration would be centralized and standardized similar to service tax registration. Under GST regime, business would no longer have to obtain multiple VAT registration – as a single GST registration would be applicable across India. The procedure for obtaining GST registration would also be standardized, thereby improving the ease of starting a new business in India.

Integration of Multiple Taxes in GST

Currently goods and products are taxed under the VAT regime implemented by State Government and services are taxed under the service tax regimen implemented by the Central Government. As VAT is implemented by State Governments, each of the State has different VAT rates, VAT regulations and VAT procedures – leading to complications. Further, in addition to VAT and Service Tax, there are various other tax regulations that businesses must comply with like Central Sales Tax (CST), Additional Customs Duty, Purchase Tax, Luxury Tax, etc.,

Under GST regime, many of the taxes in existence today would be subsumed and made into one tax. The following taxes are proposed to be subsumed under GST:

Integration of taxes under GST

Central Taxes subsumed under GST

  • Central Excise Duty (including additional excise duties)
  • Service tax
  • Additional customs duty (CVD)
  • Special Additional Duty of Customs (SAD)
  • Central surcharges and cesses

State Government Taxes subsumed under GST

  • Value Added Tax
  • Central Sales Tax
  • Octroi and Entry Tax
  • Purchase Tax
  • Luxury Tax
  • Taxes on lottery, betting & gambling
  • State cesses and surcharges
  • Entertainment tax

GST Exemption for Startups and Small Businesses

Currently, VAT registration and VAT payment is mandatory once a business crosses an annual turnover of Rs.5 lakhs in some States and Rs.10 lakhs in a few other States. The multiple VAT legislation enacted by each State creates confusion and complexities. Once GST is implemented, businesses with a turnover of less than Rs.10 lakhs per annum would not have to register for GST nor collect GST. Further, businesses with an annual sales turnover of Rs.10 lakhs to Rs.50 lakhs may have to pay GST only at a lower rate. Therefore, once GST is rolled out, thousands of startups and small businesses currently having an annual sales turnover of Rs.5 lakh – Rs.10 lakh would be out of the tax net providing relief to them from collection and filing of GST returns.

GST will Improve Ease of Doing Business in India

Currently, businesses like restaurants or computer sales and service – which sell goods and provide services as a package have to comply with both VAT and Service Tax regulations. This creates complexity for the business and they have to calculate taxes for the transaction based on different rates for different items. With the introduction of GST, the distinction between Goods and Services will be gone – thereby making compliance easier. Further, invoicing will be easier for businesses as only one rate would be adopted.

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28 Replies to “GST Advantages for Startups and Small Businesses”

  1. Prahu Haladker says:

    I am into plastic recycling. I buy post consumer plastic waste from rag pickers and small vendors.this waste has already been taxed everal times during it’s journey to consumer and post consumer it has been disposed off as municipal waste on streets/roadside. the rag pickers and small vendors collect these waste and sell it to us at a price.they are very small dealers and hence exempted from registration and taxes. When I buy waste from them and add value with recycling, the tax should be only on the value addition at my end. Please clarify.

    1. Admin says:

      Although your raw material is scrape but by recycling you are creating a new or different product for the end-user. The usage of that scrape material changes, thereby making tax levy-able on the entire product value (including scrape) which i feel is justified. Please discuss the said matter with and expert as well. GST might bring in subsidies for such category of industry.

      Thanks for your visit !

  2. Shreshtha says:

    If someone has two shops. Each shop have turnover of 7 lakh. Then he have to register for GST or not? Because in total hit turnover limit is exceeding 10 lakh.

    1. Admin says:

      Dear Friend, The turnover limit is still not specified, but is supposed to be quiet higher than 10 lakh.
      As far as the definition of turnover is concerned, it should include all the transaction registered under one PAN, so if you have two shops, both registered under one PAN then total turnover of both should be calculated to reach the registration limit.
      Please use “SEARCH” section in the site to find various articles related to your query. Experts too feel free to reply!

  3. manjunath says:

    Dear sir,

    I am planning to start online business over india. means supplier/seller with online portal ie. Flipkart. for this what type of basic requirments i need to do.

    1. Admin says:

      You will have to understand what role your portal shall be providing. If you are going to be service provider, then you shall have to enroll for services tax and your material supplier should have a VAT number. Many states have imposed double taxation i.e. considering your services/sales as Vatable from the Point of Sale, so kindly contact a local tax consultant to walk through the Service tax/VAT-structure.
      GST is the actually reason to come in India, to clear lot of ambiguity of online transaction. Thanks for visiting.

  4. sanny kumar says:

    mai ek village me chota sa computer institute chalata hu. kya GST mere liye v jaruri hai

  5. Arun says:

    Hi,

    I own a ladies garment shop (boutique) in Delhi, as of now I have only registered the shop name under the department of labour. Should I go ahead and register for VAT or should I wait until the GST is launched.

    Also, do I need to do any other formalities to avoid any legal or sales tax actions! Please advise.

    1. Admin says:

      Broadly, you should start preparing for GST by registering your related VAT department.

  6. Sandeep p Chougale says:

    My firm is already vat register but my turnover is 7 lakhs I can register GST yes or no? Pl give suggestions me.

  7. Monika Shrivastva says:

    I am a house wife and also a PAN no. I want to start online sell mobile accessories through flip kart, Amazon etc. from home. My starting product is less than Rs. 500. Please suggest GST registration necessary for me.

    1. Admin says:

      Hello.

      GST registration shall be mandatory after one achieves a certain limit of turnover. But in your case, since you wish to affiliate with online websites as a seller, it is desirable to enroll for GST as and when when it shall be applicable, since these web markets have a mandatory pre-requisite. Hope it helps.
      You can even begin local vat registration if you are in a hurry to begin such sort of business.

      1. Monika Shrivastva says:

        Thanks Sir,

        Can I start selling without registration in India. I will do registration when GST will implement (like July.17). Please suggest.

        1. Admin says:

          Hi. There are certain state level turnover limits, below which you will be considered an unregistered dealer, but still can become a seller. After achieving those threshold turnover limits you shall have to go for VAT or Service tax registration, in most of the cases. It is ideal to register now and start doing business as a registered dealer, rather than wait for GST to set in. Thanks.

          1. Monika Shrivastav says:

            Thanks , I will sell through e commerce web site like Amazone, ebay, etc.. so it will sell in all over India. There is no problem?. My item (mobile accessories) wt. is below 100 gms and rate below Rs. 200/- turnover below 2000/- per month and dispatch through only courier. Please suggest.

  8. Pratik says:

    I have Vat registration in multiple states under interior contractor . What’s the benefit of GST for me ? Will I need only GST registration at one state only and that shall be valid in all states of India ??

  9. Devendra Singh says:

    I do job work for clients like i print garment and give it to client they mfg the final product and sell it. What is GST rate applicable for me. Thanks

  10. HAFEES K S says:

    Hello Sir, what is turnover required for the regestration of GST…if anyone have low turnover is he he required to do enrollment in GST and for regestration.Kindly specify in details.

    1. Admin says:

      Hi.Currently the registration is open only for TIN holders, as a part of migration process, from old system to new GSTN system. It is better to wait for fresh registration after GST is implemented.

  11. Deepak says:

    I m small supplier of all type of goods to central govt organiisation…i have got tin …my turnover never crossed 5 lac…should i reg in gst….is it profitable for me

    1. Admin says:

      If you are going to be in any sort of business / services in future for a longer term , yes it is good to have some sort of registration, including GST.

  12. Minaxi S. says:

    Hi,

    i am going to start online business, but i dont have TIN no. but want to start between 2-3 months so please confirm should i wait for GST applicable.

    is there any solution to start my business.

    1. Admin says:

      It is always advisable to take TIN no. ASAP. But if you do not want to invest much in acquiring a TIN number, then you can wait for GST to set in, as it will be very easy to get a GST number because the registration process will be straight forward.

  13. Minaxi S. says:

    But how would i know when the GST will set, do you have any idea???

    so that i can think further

    1. Admin says:

      Well we can guess it from 01/07/2017, But the actual clarity will be given by the government in April/17.

  14. Minaxi S. says:

    Thank you so much..

  15. Pradeep B says:

    I have started shop this financial year & turnover is less than 5 lacs this year. Now, next year turnover might increase Should i apply for VAT number, or should i wait for GST roll out ?

  16. Shivani says:

    My father have a cloth shop in a village in up and total sell will around 7-9 lakh annual. But they have not registered their shop till now. Is it compulsory to get TIN NO or GST NO. Please help me

    1. Admin says:

      For small trader, there is a turnover limit of 20Laks as exemption for enrolment. And as far as TIN No. under VAT is concerned , it depends on state about the turnover limits. Hope it helps. Thanks

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