Tax rules have always been a huge hurdle for start-ups. Many upcoming entrepreneurs may start confused about what is required of them. This often leads to defaulting, which may attract heavy penalties or even jail time. When the Goods and Services Tax (GST) came into force in India as of July 1, 2017, its main aim was to abolish indirect taxes such as service tax, VAT, central excise duty, and CST, among many others. Instead of collecting taxes at the point of origin, taxes are now collected at the point of consumption. It was also meant to ease tax compliance, especially for small businesses and start-ups.
A high threshold for applying for GST
Before GST implementation, businesses that registered a turnover of more than Rs 5 lakh in a financial year were required to obtain VAT registration. However, GST now means that a business is only required to register if its turnover exceeds Rs 40 lakh. For service providers, the limit to register for VAT registration stands at Rs 20 lakh. This high threshold is a sigh of relief for small businesses and start-ups trying to make it with tight budgets. Since many start-ups in India are classified under the service industry, they were required to collect and pay service tax. One of the main concerns was the lack of provision to claim state VAT credit against service tax liability. However, GST now allows businesses to claim tax credit on purchases.
Simple and seamless filing procedure
The introduction of GST also means the process of registering and filing tax returns is now simple. By taking the process online, small businesses and start-ups will find it fast and easier than when one was required to apply at tax offices. These lesser compliance requirements such as filing returns, maintaining records, and issuing invoices among others mean start-ups can devote more time and resources to running their businesses. It also means business owners can take time out to relax, exercise, and play their favorite slots at sites like hindislots.com among others so as to recharge and improve on their business ideas. Since taxes are set at a lower rate, start-ups can enjoy higher liquidity, meaning they can concentrate more on adding value to their goods or services.
Ease of doing business online
With many start-ups taking advantage of the internet to do business, the implementation of GST has been a huge boost. Before GST, businesses were required to fulfill VAT laws in the states where they were transacting. However, GST has eliminated this requirement, making it easy to do business across states.
Increased efficiency when it comes to logistics
Before GST was implemented, start-ups would maintain multiple warehouses in states due to interstate taxes. This often resulted in inefficiency as some would operate below their capacity. However, the implantation of GST meant that the restrictions and tax charges of interstate travel were now eliminated.
Penalties for failing to comply
Even with the numerous hurdles already eliminated, start-ups that evade GST laws may face the consequences. For example, there are penalties for failing to register under GST, not filing returns in time, not issuing invoices, committing fraud, and incorrect invoicing. It is thus important to get acquainted and comply with GST rules to avoid these penalties.
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