It’s been almost 10 years since India has been waiting patiently for this “one tax regime” to become a reality and now since the distant dream seems a step away the question arises are we ready for it? Have we been hoping pragmatically or were we in the winds of certitude taking us too high, making for a painful fall. Let’s look at the possible effects GST would have on startups and small businesses.
You all must be knowing what GST is but still if by any chance you don’t, here’s the definition-
“Goods and services tax (GST) is an indirect tax which will be charged in place of a plethora of taxes like state value added tax (VAT), central excise, service tax, entry tax, and various others.”
A Simple Start
It’s been a difficult story so far for the Indian entrepreneur at least where the tax is concerned. Forget running challenge started before trying to start the business. Different doors were to be knocked to get the green flag waving. Before starting a business it is required to get the VAT registration from sales tax department. If by any chance it were a multi-state business you had or will have to run from one office to another until GST comes into action, deal with different tax rates, different submissions, different procedures followed in that particular state, OMG! Onerous, absolutely tiring.
But, a sigh of relief, now after GST there won’t be this complication as the whole process can be performed sitting on your comfortable couch with your AC on via the Internet, huff! now you can easily expand in different states without burning out your precious time and energy running in different directions.
It was like watching a movie online with continuous buffer, the net got better but the state is taking some time. It’s really taxing to move around in the country if you are moving goods, transport vehicles are halted at different state borders for small border tax and check post issues which not only consumes a lot of money but crucial time.
But wash off that tired face replacing it with a vigorous smile as with GST the hassle would end. Ahh yes, I know. It will bring down the interstate tax which will plunge the transportation cost and also bring down the time consumed in moving goods. Not only that it will also bring down the cost incurred in managing stocks as interstate supply will become tax neutral.
With so many types of taxes being imposed on businesses, it was almost stifling to the point irksome both for the consumer and the seller. Businesses which had sales and services in the menu were easy bates for an intricate tax as ours. Restaurants have to calculate VAT and service tax separately on items which makes the already so complicated tax more so intricate.
Yeah, you guessed it right, not anymore. Under GST, sales and services won’t be considered as separate subjects but will be judged on same parameters, hence, same tax, one tax would be applied.
Yeah! Now I Get It
If it were this simple I would have understood it all along the way, but anyways better late than never. Startups and small businesses give away a large chunk of their time figuring out the taxes. Since the different state has a different set of taxes with different intricacies our passionate entrepreneur ends up convoluted in the web. But is about to be extricated as with GST the process will be simplified. It will subsume the taxes and be one fat little attractive whole.
Who doesn’t love free stuff? We all do, yes even you. Well, here we probably won’t be getting any freebies but there are exemptions, yeah money saved is money earned. Up until now and for a few more months until GST unfurls its wings to fly in this vast territory businesses with a turnover of more than 5 lakh rupees will have to register for VAT. Which is more toiling than it seems as it needs to be done separately for different states running different rules and rates.
But to everyone’s relief with GST things are about to change. The bracket of exemption is widening as the businesses below 20 lakh rupees turnover won’t be charged with GST. Also, the business that falls between the turnover of 20 – 50 lakhs will be charged at a lower rate if they opt for the composition scheme which is optional.
The Manufactured Problem
While small businesses will be enjoying the tax exemption in VAT the small businesses in manufacturing will be facing the brunt in the form of increased tax as until GST the manufacturing units with a turnover of less than 1.5 crore Rs were exempt from excise duty but under GST this amount is being brought down to just 20 lakh rupees which will include a considerable amount of manufacturers.
A Systematic Problem
New tax, new operations, and old system doesn’t sound good and even if it does, it doesn’t work well. This becomes an added cost for businesses as now mostly businesses use an enterprise system to do the accounting and handle tax issues. So, with the influx of GST, the companies might need a change of their existing system or at least an upgradation which also involves training the employees to get accustomed to the new functions.
The Problems Online
Many businesses nowadays are operating online without any physical presence selling in different states. After GST they would be required to register their business in those states they are operating in and to add to the misery they are not even eligible for the composition scheme so no lower tax benefit to them, oh snap!.
Also, the facilitators of E-Commerce will be required to collect TCS under GST which adds nothing but complications to the process.
An Extra Problem
Small businesses often don’t hire professionals to handle their taxes and mostly do the job on their own which saves them some cost. But with GST as it is a new tax, unknown, not visited, they might need to take professional services.
An Unpleasant Date
The other major problem is not an intrinsic property of the new tax but an external factor an unnatural calamity which could have been saved. GST is all set to become a reality with the tentative date being 1st July 2017 which will only make the mess more messier. What this means is that for the first 3 months of this fiscal year (2017-18) the companies would be working on the existing tax structure and for the remaining year, they need to be GST complaint (Oh snap, and it were to be simpler).
This will create a ruckus when transitioning and will be a grueling task for companies. It will be difficult for companies to transition in one day and can lead to a situation where they might end up running both systems parallelly.
WORRIED! DON’T BE. We’ll Help You
The transition is one of the major issues that companies are faced with where GST is concerned but even that could be simplified. S.I.M.P.L.E our enterprise system for your business comes with inbuilt GST compliance module which will make the transition easy. Not only that it’s other out of the box features will help increase productivity and efficiency in your business processes. To know more about the system click me –
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