GST Advantage for Start-ups and Small Businesses

Last Updated at: Jan 15, 2021
gst advantages
On 12 June 2020, the Government announced a range of leeways in the Goods and Services Tax (GST) system for the MSMEs at the GST Council meeting. Relief for small and medium-sized enterprises comes in the form of lowered tax and penalties.

All start ups are set to receive a lot of benefits with the arrival and proper implementation of the goods and services tax. The ease of doing business is one of the many benefits that they will receive because of this new system of indirect taxation. At the same time, the integration of various indirect taxes will allow you to focus on your business in an even better fashion.

The GST bill was passed in the Lok Sabha in 2015. The concept has evolved over a decade of discussions involving how to implement it in the best possible manner. Now that it’s all cleared up, the GST is ready to be rolled out in July 2017.

Below you’ll find the list of services that will walk you through the need for the service, the eligibility, documentation procedure and benefits. Our experienced team members are there to guide you and complete the process at ease.

We’re going to look at certain advantages that this monumental change in our tax system will bring to small enterprises and start ups. Any person who supplies goods and services is liable to pay the GST. While there is a basic exemption limit for small suppliers of such products and services, the tax is payable to all.

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Ease of Business
Businesses currently have to undergo VAT registration from the state’s sales tax department to start on their own. It gets more difficult to get a VAT for every state since each one has a different regulation regarding its VAT law.

This is where GST comes into the picture. Every process will become centralized and will speak of a uniformity beyond the domestic boundaries of a state. New businesses can say goodbye to multiple VAT registration since all they now need will be one registration under GST, which will be applicable across the country.

Goods and Services Tax (GST) is the value-added tax levied on all goods and services that we use within the country. We offer a GST rate finder service that lists out the GST rates of all goods and services that are available in India. This service is also known as the HSN finder.


Integration of Multiple Taxes
At present goods and services are taxed under various VAT registrations that exist, in various forms, across various states in India. Each state has a separate VAT rate, regulations, procedure, etc. in addition to the VAT and sales tax, there are others that businesses must adhere to like CST, purchase tax, luxury tax, etc.

Under the GST regime, all these taxes will under one umbrella and be made into one single tax. The following taxes will be merged with GST. Returns will also be common.

Central taxes including central excise duty, service tax, additional customs duty, special additional customs duty, central purchases and cess.

State taxes include VAT, central sales tax, octroi and entry tax, purchase tax, luxury tax, taxes on lottery, betting, gambling, state cess and charges, entertainment taxes.

GST Exemption for Startups and Small Businesses
As of now, businesses crossing an annual turnover of Rs 5 lakh (Rs 10 lakh in some states) have to have VAT registration and VAT payment as a necessity. This multiple VAT regulations across states is bound to be confusing.

The problem will, however, not exist when GST comes into the picture. Once implemented, businesses with a supply turnover of less than Rs. 20 lakh would not have to register for GST or even collect it. Additionally, those with a turnover between Rs. 20 and Rs. 50 lakh may have to pay the GST at a lower rate, under the composition scheme. This only gives a big impetus to startups with a nominal turnover thus bringing them relief from collection and filing of GST returns, etc.

Bring Improvement
All businesses, as of now, be it goods or services, have to comply with various VAT and service tax regulations across the state, which only adds to the complexity of the whole procedure of running a business. With the introduction of GST, the difference between goods and services will be gone. Also, invoicing will be easier for businesses since there would only be one rate across.

Removal of a complex structure of indirect taxation in India has boosted the small and medium scale businesses to a substantial extent. They do not have to apply for registration for various taxes such as Service Tax, Value Added Tax and Luxury Tax. As a result, starting a company has become simpler than ever.

To know more about GST Registration: Click here

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.