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Aayushi Kishore

Aayushi Kishore is the Chief Marketing Officer and Co-Founder of BOLTT Sports Technologies Pvt. Ltd. A sports and a fitness enthusiast, Aayushi, with her comprehensive and deep knowledge about the global market, is leading a team towards developing a strong position for BOLTT in the Indian industry.

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GST - A Boon or a Bane for the Startup Space

With the implementation of GST, the mandate for compliances would increase, across states but the uniform system of taxing will be a sigh of relief.

With GST being implemented from July 1st, a furore of activities are seen to meet the deadline. In the Union budget presentation, Arun Jaitley made it clear that the move will be pro start-ups. With the government encouraging schemes like standup India, Startup India, it’s expected that GST will bring a much-required push to the start-up sector.

With the announcement of demonetisation and its aftermath, the startup space has seen a challenging economic condition. However, with the unfurling of GST, and a more centralised system of taxation, it’s expected that the business landscape is going to change for the good.

Period of claiming profit-linked exemption for startups is increased to 7 years from 5 years

The GST will have implications for the startup sector 

Businesses in their nascent stage with less than 20 lakh as their annual turnover would be exempted under the GST regime. From the current indirect tax regime that provides a threshold limit in the range of Rs 5–10 lakh, the GST provides further relaxation to give room for growth to start-ups. This also leaves room for startups to test different models, kickstart their business and avoid the gruelling drill of multiple taxes and permission. The GST has another offering for startups with a turnover between 20-50 Lakh, the companies can apply for the composition scheme, and the rate of GST would be lowered.

A major challenge for the startup space has been of getting their registration done, under the GST, this would be faster, saving time, energy, resource and effort under the common GST portal. Although GST calls for state wise compliance, the one-stop registration process will resolve the challenge of running from pillar to post.

Movement of goods to different states poses a challenge of taxation at every level owing to different check posts and the issues involved with them.

GST takes into consideration these bottlenecks and proposes a one market regime and a more centralised system of taxation. This would reduce logistics cost for budding companies.

The GST has a provision of electronic way bills where goods worth Rs. 50,000 or more are required to produce e-bills.The automation of these bills would make the movement of goods across states smooth.

The current regime differentiates goods from services and there are challenges around the transaction of these two. The GST system will make bring more clarity to the current system of transactions and remove ambiguity around electronic devices, service-centric models like restaurants and remove double taxations, making the process more structured.

With the GST, the administration of taxes will become simpler. Under GST, the role of multiple tax authorities and multiple windows of taxation all be brought under one roof making assessments easier for start-ups.

However, GST also comes with its fair share of challenges, especially for the ones engaged in manufacturing and retailers selling through e-commerce platforms. Under the current system, there’s a threshold limit for manufacturing companies to obtain excise registration of Rs 1.50 crore. The mandate of GST regime aims to bring the manufacturers with a turnover of more than Rs 20 lakh into tax net, which is much lower than the current bracket.

Another major challenge would be faced by e-commerce players for which GST mandates a registration irrespective of the threshold limit.

This has a possibility of leading to an exodus of SME sellers from e-commerce portals.

Despite some challenges, GST certainly impact the way India does business positively. For startups, GST will pose certain challenges initially but will open avenues and make things hassle free in the long run.

With the implementation of GST, the mandate for compliances would increase, across states but the uniform system of taxing will be a sigh of relief.

It would also strengthen the system of taxation and remove ambiguities around the multi-level taxation systems in existence and bring in efficiency.

If the budding entrepreneur wants to take a plunge, then the time is ripe to make that plunge.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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