Tips for CAs to Help Startups During GST Transition

How can CAs help make GST simpler for startups? By reminding startups that some of them must start paying tax even if their turnover is just 20 lakhs.

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GST is quite complex and take a while to understand. To make it easy for CAs to wrap their head around this new tax regime, Vivek Jain, founder of the CAclubIndia, wrote these lines below:

Tip 1: Helping your startup client with Registration and Compiling Tax Returns 

Startups in the manufacturing sector under existing excise laws had to register when their turnover crossed rupees 1.5 crore. But with the implementation of GST, the turnover limit has been reduced to rupees 20 lakh thus increasing the tax burden for many manufacturing startups. CA professionals should facilitate the step of registering new companies under GST, to avail schemes related to it.

Tip 2: Helping ecommerce startup clients control Compliance Cost 

CA professionals should advice ecommerce players to understand how they can easily save a good amount of tax by adding themselves in GST Slabs and also by regularising them.

There is a concept of TCS under GST. Every ecommerce operator (not the agents) shall be liable to collect 1% of the net value of taxable services from the supplier. This 1% tax is called tax collected at source (TCS). When orders placed through ecommerce websites are cancelled or items are returned due to any reason, after 1 July, compliance cost has been increased. The cancellation tax to be levied is approximately 15-18%.

Furthermore, ecommerce players will be liable to GST for interstate stock transfers. They shall be liable to IGST (Inter Goods and Service Tax). Both these issues have bought together a need for cost optimisation policies on which CAs and startups should work together.

To further help you out, here’s how the law defines an owner of ecommerce platform and a supplier to an ecommerce platform.

Who is an ‘Owner of Marketplace’?

According to section 2(45) of the CGST Act, “An ecommerce operator is a person who owns, operates or manages digital or electronic facility or platform for electronic commerce”.

Such marketplace owners must:

1. Register under GST irrespective of their turnover.

2. Ecommerce is till counted under the Forward Charge Mechanism. But some categories of supplies are covered under RCM, which shall be applicable even if the marketplace owner does not have an establishment in a state. Any person representing him locally will be liable to pay the tax

3.The marketplace owner should collect tax at 2% on the net value of taxable supplies made through their platform and further tax at 1% of net value must be collected as TCS.

Who is a ‘Supplier/ Service Provider’?

According to section 2(105) of the CGST Act, “Suppliers on ecommerce platforms are persons who supply goods or services on an ecommerce platform.”

Such suppliers must:

1. Register under GST. Even e-commerce suppliers whose aggregate turnover does not exceed the threshold limit for registration will have to compulsorily register and are required to file periodical returns under GST   

2. Further these suppliers cannot take exemption under the composition scheme even if his aggregate turnover does not cross rupees 50 lakhs. The supplier does not have no other option but to become a composition tax payer

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