Goods and Services Tax (GST) - The GST Bill was passed in
the Lok Sabha on May 6, 2015. The concept of GST in India has been around for a
decade now. The GST bill is scheduled to be tabled in the Rajya Sabha after it
is passed by the Lok Sabha. Once cleared by the Rajya Sabha, the bill will roll
out India's indirect tax system and roll out GST in April, 2016. In this
article, we will review some of the key benefits of GST Registration for startups
and small businesses.
Overview of Goods and Service tax (GST)
GST or Goods and Services Tax are a value-added tax, levied
at all points of the supply chain, and any tax paid on input earned for use in
the supply is allowed for any tax. Therefore, the end-user is the last person
and organization in the supply chain to bear this tax. The introduction of GST
in India is expected to simplify the structure of indirect tax structure at
both the central and state levels - now changing the multiple levels of complex
taxation that exist in India.
GST will improve the rate of doing business in India:
Starting a new business in India, businesses now have to
register with VAT from the state sales tax department. Since each state has a
different process and fee for VAT registration, it is difficult for traders
working in multiple states to comply with and maintain VAT regulations.
With the introduction of GST in India, the GST registration
process will be centralized and the service tax registration will be the same.
Under the GST regime, businesses no longer have to register multiple VATs - as
one GST registration applies across India. The GST registration method will
also be standardized, which will increase the ease of starting a new business
in India.
Integration of multiple taxes in GST:
Goods and products are currently being taxed under the VAT
system implemented by the state government and services are being taxed under the
service tax system implemented by the central government. Since VAT has been
introduced by the state government, each state has different VAT rates, VAT
rules, and VAT systems which create complications.
In addition, in addition to VAT and service tax, there are
various other tax rules that businesses need to comply with Central Sales Tax
(CST), Additional Customs Duty, Purchase Tax, Luxury Tax, and so on.
Under the GST regime, many of the taxes that exist today
will be subsidized and converted into one tax. The following taxes are proposed
to be paid under GST.
Central tax under GST:
- Central Excise Duty Including
Additional Excise Duty.
- Serve.
- Additional Customs Duty (CVD).
- Customs Extra Custom Duty (SAD).
- Central Surcharge and Cesses.
Under the GST, state government taxes have been reduced:
- Add value.
- Sell ??centrally.
- October and entry tax.
- Buy taxes.
- Make it luxurious.
- Taxes on lotteries, betting, and
gambling.
- State Cesses and Surcharge.
- Entertain.
GST exemption for startups and small businesses:
Currently, VAT registration and VAT payment are mandatory
after the business exceeds Rs 5 lakh per annum in some states and Rs 10 lakh
per annum in other states. The multiple VAT rules enacted by each state create
confusion and complexity .Once the GST is implemented, traders with less than
Rs 10 lakh per annum will not have to register for GST or collect GST.
Moreover, traders who trade between Rs 10 lakh and Rs 50
lakh per annum will only have to pay GST at a low rate. Therefore, once the GST
is rolled out, thousands of startups and small businesses in the annual sales
of Rs 5 lakh - Rs 10 lakh will be out of the tax net and will be relieved of
the collection and submission of GST returns.
GST will improve the ease of doing business in India:
Currently, businesses such as restaurants or computer sales
and services - which sell goods and provide services as packages - have to
abide by both VAT and service tax regulations. This creates complexity for the
business and they have to calculate the transaction tax based on different
rates for different items. The distinction between goods and services will be
eliminated with the introduction of GST - which will facilitate the digestion
process through compliance. In addition, invoices will be easier for businesses
because only one rate will be accepted.
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