GST Impact Analyses on Startups. - Startups have no Special Incentives Under GST
15 June, 2017 Ahmedabad :
GST Impact Analyses on Startups. - Startups have no Special Incentives Under GST

India has seen unleashing of potential by the young startup companies and some of them have become overnight success. Today we see Startups everywhere, from Food to Fun, Knowledge sharing to Travel and Tour, Finances to Insurance. The government has also come out with various initiatives and incentives for Startups. However, when it comes to the new taxation regime under Goods and Services Tax, no such incentives are seen. The GST threshold exemption limit of 20 lakhs (10 Lakhs in case of special states) is for one and all, irrespective of a traditional old business or a startup company.

Every startup firm will have to register with under GST if they are giving taxable supplies and crossing the threshold limit. Though a Composition scheme is there for small players, specially traders and notified manufactures, provided that the aggregate turnover in the preceding financial year was less than 75 lakhs rupees. Those who will opt for composition scheme will neither be entitled to take any Input tax credit nor they can charge or recover in their invoices any GST amount. In other words if the Startup opts for a composition scheme, it will have to bear the GST in their cost without separately charging the same to their customers. Thus there are no special treatments for a Startup under GST.

The startup firms may be in supply of services or goods, however they need to understand the intricacy of GST Classification HSN / SAC or Service tariff codes ,as a slightest error in deciding the tax slabs of 5% , 12%, 18% or 28% may eat up their profits, if they are unable to classify there goods / services in a proper manner.

Today majority of the startups are IT based companies or those using Information technology. Many of them are fall in the category of E commerce or those using electronic platforms as their business models. Aggregators in one of the other form are commonly seen today as Startups. The government is doing a lot for such startups right from Handholding to easy finances and arranging incubators. However, when it comes to easy of doing business, Taxes play a vital role, compliances is an equally important feature. In the GST regime, E-commerce, aggregators, e- platforms are having a special mention and are taxed differently. One needs to understand as to whether they are required to Collect Tax at source and file a returns accordingly. Thus every startup needs to understand and analyze the GST impact on their venture as we have hardly few days left to the D day 1st July 2017. The countdown has begun.

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Courtesy: From the desk of Monish Bhalla, Founder, www.servicetaxonline.com
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Date: 14-08-2018