India is home to more than 50,000 registered startups, and the number is burgeoning every day. The startup wave started a decade back in India and has become a major pulse in the growth of the country. Many Indian unicorn startups with worldwide recognition are making India a trademark of technological growth and empowerment.
Seeing the soaring growth of startups, the Indian government has laid down many policies to help the new entrepreneurs gain traction in the competitive market and stay ahead of the global competitors. The Goods and Services Tax has done a lot of favourable jobs for the recently launched startups.
As a young business, you can also take the benefit of the new tax regime. Read through the points below to know more about the implication of GST on your startup.
One of the tedious tasks that most delivery-related startups faced was the movement of goods across the state borders. With the introduction of the e-way bill, startups can now take advantage of the easy and fast delivery of both perishable and other marketable items.
An electronic way bill is a unique bill with an electronically generated bill number which is available to all the parties involved in the movement of goods. This helps in hassle-free shipping of goods in interstate transport and saves a lot of time and boosts the speed of delivery.
New companies can use this feature to their benefit in facilitating a smooth shipping experience for their customers. The increase in the efficiency of the delivery might even open up a new segment in the logistics market, with other technological innovations ready to follow.
Easy To Understand Taxes
The Good and Services Tax was introduced to simplify the taxes, and multiple indirect taxes and levies were clubbed to create a single tax regime. The current scenario is easy to understand and will help new enterprises in optimising their resources and reducing compliance burdens.
The easy to pay online portals also facilitate in prompt payment of taxes. Even submitting a tax invoice is easy with GST as sellers can use the gst tax invoice format in excel free download option to create an invoice and share it with the buyers. With fewer complications, startups can understand the right way to file their tax returns.
To make compliance an easy task, the government has introduced a composition scheme in GST. Thus, you can save time and effort to maintain and improve the operations of the business rather than being stuck in the tax compliance processes.
As per the scheme, a startup with less than 1.5 crore rupees turnover can pay a flat rate of tax on the annual turnover instead of filing multiple recurring returns. The tax rate can be 1% or 5% depending upon the nature and activities of the business.
Please note that a startup which avails the composition scheme for tax benefits cannot reap the benefits of input tax credit (ITC). Additionally, the interstate supply of goods is not possible for them.
The composition scheme also puts a limit on selling merchandise through e-marketplaces as GST mandates collection of TDS from e-commerce. If you are planning to enter the business of delivery of goods or opening up an e-commerce portal, then you should not opt for the composition scheme.
Compliance Score Rating
GST authorities have implemented a rating mechanism where prospective buyers can check the credibility of a startup. The compliance score will also determine the speed of refunds on the basis of the score, so a good rating is essential to get more business from the market.
As a startup company, you must follow the guidelines and compliance to obtain a good rating. Not having a substantial rating can lead to potential business loss and opportunities.
Ease Of Doing Business
In the previous tax regime, getting a VAT registration and other documentation was a time-consuming process. Furthermore, every state had a different VAT rate and following the procedures were tedious.
But under GST, the government has clarified all the tax norms and simplified the process of registration. Startup ventures only need to follow the guidelines stated on the web portal and submit the relevant documents. Upon checking and authentication by the tax authorities, you can get the certificate using the gst registration certificate download option on the website.
GST Exemption For Startups
If your startup has a turnover of under Rs. 40 Lacs per annum, you are not required to get the registration done under GST. The businesses wherein the turnover is between Rs. 5 Lacs to Rs. 40 Lacs will be out of the assessment and are not required to file the returns.
The standardisation and centralisation of GST will help the organisations to get on board easily, and small startups can utilise their resources to improve their efficiency and grow their business.
The data generated by the GST will be helpful for future startups to get the eyeballs of the investors and maintain a higher compliance ratio. GST ensures the transparency, authenticity and relevancy of data to help startups get investment from angel investors and venture capitals.
The data can determine if tax compliance is at par, and the rating is high enough. Furthermore, investors can use the data to study the operational excellence of young startups for a promising partnership.
GST is a nationwide tax reform which changes the way business is done, and it impacts both large enterprises, medium scale businesses and homegrown startups. GST ensures that startups have simpler tax compliance, and they can reap the benefits of smooth movement of goods across state borders and other exemptions listed by the authorities.
The current tax system will encourage new businesses to have a better organisational output by saving on resources and improving the management of funds. Startups can focus on pushing out innovative products to cater to the market needs. GST, along with other policies, is creating a prospering and progressive environment for startups in India and helping them scale to the international level.