GST-HOW START UPS ARE BENEFITED

GST: WHAT IT MEANS

Goods and Services Tax (GST) has now become a household term and everyone everywhere seems to be concerned with the latest news and press releases and developments, irrespective of whether they are direct stakeholders or not. Producers, Service providers, consumers, officials, and every member of the public hold a stake in the implications that GST has on our economy in one way or the other; but businesses have placed the greatest bet on GST – whether they now need to transform their mechanisms into the new compliance model or whether a new business is to be set up amidst the dynamic market condition prevalent now. We bring to you here a brief overview of why it would be beneficial to kick-start a business in the current scenario.

·         Simpler Procedures: Since the idea is “One Nation, One Tax, One Market”, inter-State movement of goods and services will become less burdensome as the multi-point taxation will be done away with. It will reduce the procedural formalities therein, and simplify the compliance requirements needed to keep in mind.

·         Raised Slab: Businesses can save a considerable amount of expenses under various heads since the slab under CGST Regime has been placed at Rs.20 Lakhs (Rs.10 Lakhs for Scheduled States) instead of the lower slabs under the VAT Regime; giving a wider window for businesses to stay exempted from liability.

·         Cost Reductions: A unified taxation system would do away with the individual tax-barriers placed by States, and bring down the cost of logistics and distribution chains. You can divest these savings into your business to achieve better productivity and efficiency instead.

·         Wider Reach: Removal of multiple tax barriers imply that businesses can easily expand and enter new markets across their own State borders without incurring great expenses or going to complex formalities. Your Start-Up gets to enter more markets simultaneously and reach a wider group of consumers, giving you an advantage that was not previously available.

·         Input Tax Credits: Businesses can avail the benefit of input tax credit system under the GST Regime[i], whereby credit of all three (IGST, CGST and SGST) can be used for discharging IGST liability. But only credit of IGST & CGST can be taken in CGST Act and that of IGST & SGST can be taken under SGST Act. Input Tax means the {IGST and CGST} in respect of CGST Act and {IGST and SGST} in respect of SGST Act, charged on any supply of goods and/or services to him which are used, or are intended to be used, in the course or furtherance of his business[ii].

The Registration and procedures under the new GST regime is facilitated further by detailed informative content released by the Govt through the portals of the Ministry and the CBEC. If you are looking to have a start-up of your own, now the time seems to be good enough to enter the market and exploit the advantages introduced by the new unified taxation regime.

You might as well consider GST a beginner’s luck!

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INDIAN KANOON

[i] S. 2 (1) (d) of the IGST and  S. 2 (57) of the MGL

[ii] FAQs on GST, published by the CBEC, in p. 91 available at http://www.cbec.gov.in/resources//htdocs-cbec/deptt_offcr/faq-on-gst.pdf

THE TIERS OF GST- AN OVERVIEW FOR THE COMMON MAN

Whereas it has been ubiquitously accepted and stated that the new scheme under GST will replace the multiple taxation system currently in place in India, it has also been realized that the new system would also be implemented on a tier-based manner, where the Centre and State will both replace their own multiple taxation with GST, whereby there will be a Centrally administered CGST and a State-administered SGST simultaneously operating in the market. The taxes that will be subsumed by the SGST include State Value Added Tax/Sales Taxes, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, and Taxes on lottery, betting and gambling. The CGST will absorb Central Excise Duty, Additional Excise Duty, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, and Special Additional Duty of Customs[i]. Both the CGST and the SGST will be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. In addition to the SGST and CGST that will be simultaneously charged on intra-State supplies, and IGST (Integrated GST) that will be levied on inter-State supply of goods and services.

CGST:

It is the tax levied by the Centre on the intra-state supply of goods and services, under the CGST Act[ii]. The Centre and State both simultaneously tax intra-State transactions and share the revenue between them by way of a revenue-sharing agreement. CGST applies to both goods and services, and  makes a provision for levy and collection of tax  by the Central Government and for matters connected therewith or incidental thereto. By a Notification of the Central Board of excise and Customs on 19^th June 2017[iii], a Common Goods and Services Tax Electronic Portal[iv] for facilitating registration, payment of tax, furnishing of returns, computation and settlement of integrated tax and electronic way bill has been introduced. The seller at each stage can avail a credit on input tax as against output tax, facilitating to curb the cascading effect of previous taxation scheme to some extent. The Schedules to the Act specify and enlist the status of various activities and transactions that will be regarded as “supply” of goods or services, or neither, as the case may be.

SGST:

This is the rate of tax leviable by the States on intra-State sale of goods and services, administered by the respective State Govt. in each State. The tax credit in respect of SGST can be set off only against CGST and IGST, and is subject to the compliance with respect to the invoice and returns requirements. Each State has to frame and enact an SGST Act of its own. The Union Territory Goods and Services Act has been enacted by the Centre to govern the imposition of GST on Union territories of the Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu, Chandigarh and other territory.

IGST:

Integrated GST is the tax levied under the IGST Act[v] on the supply of goods and/or services, in the case of inter-State trade across India. It also includes the supply of goods or services in the course of import into India and export from India. IGST would replace the current Central Sales Tax that is levied on inter-State sale of goods and services. The IGST would also be shared between the Central and State Govts. The input credit for IGST may be adjusted against CGST, SGST or IGST. IGST will not be imposed as a third tax in addition to any other tax, but only as the single tax levied on inter-State sales of goods and services.

The taxation scheme that has gone live today is indeed a moment that the Indian economy had waited for eagerly, and its practical impacts are yet to be seen. However, the public vigor to welcome GST has been evident since the idea was introduced, with public opinion ranging from blatantly whimsical speculations to proper economic forecasts doing its rounds on the internet and elsewhere. Now that it has finally seen daylight, we need to let GST take over the market and come into full-swing operation, to see how the market responds.            

                                                                                                                                         

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INDIAN KANOON

[i] Source: Frequently Asked Questions (FAQs) on Goods and Services Tax (GST), Press Information Bureau, Government of India, Ministry of Finance, posted on 03-August-2016

[ii] THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 (NO. 12 OF 2017) published in the Gazette of India on 12^th April 2017

[iii] Notification No. 4/2017 – Central Tax, by the DEPARTMENT OF REVENUE, Ministry of Finance.

[iv]  www.gst.gov.in

[v] THE INTEGRATED GOODS AND SERVICES TAX ACT, 2017 (NO. 13 OF 2017), published in the Gazette of India on 12^th April 2017