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29 Jun

GST an Overview

GST – Goods & Service Tax is one indirect tax for the whole nation. With the implementation of this the country will be amalgamated into a common market. It is a single tax that one has to pay on the supply of goods and services, be it a manufacturer or a consumer. It is expected to bring an economic integration in the Indian economy. It will help to streamline the indirect taxation process while making it easier and more effective. From 1st July, 2017 GST will replace the surplus of various taxes.

Benefits of GST for SME & Start-ups

GST is going to benefit all businesses, but the start-ups and SMEs can have a bigger celebration because:

Starting Business Gets Easy

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When starting a new business VAT registration from sales tax department is must, problems increase when they have to operate their business in various states because all have different procedures and charges. GST brings uniformity in the process and a centralized registration process which makes it easier to do business in different states too.

High Exemptions for SME & Start-ups

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Image Source: https://var.ge/storage/the-exempted-person-from-fetters.jpg

Up till now any business that had a turnover of more than 5 Lakh had to register for VAT and also pay VAT, but GST has now increased the limit to upto 10 Lakh. That’s not it; the taxes will be lower for businesses having a turnover between 10-20 lakh. With this new point added in GST, newly established businesses or SMEs will be less burdened with the tax.

Simple Taxation Procedures

When you are a start-up along with setting up your business you have the burden and stress to manage various taxes. Following different processes of different States can get daunting and tiring sometimes. GST has simplified all this because all taxes are integrated, making the taxpaying process simple and easy.

Relief for Start-ups and SME in Sales & Services

There are many businesses like restaurants that come under sales & service taxation. They have to calculate VAT & service tax on each item separately. This makes everything very intricate. Introduction of GST does not require separate calculation. GST does not count them separately thus the tax will be calculated on the total bill, making life and work both easy.

Drop in Logistic Cost

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Image Source: https://var.ge/storage/trucks-and-freight-containers-in-a-logistic-centre.jpg

We all must have seen long line of trucks and heavy vehicles on the toll tax road. These vehicles have to pay border tax and go through check post procedures. This increases the cost and a lot of time is consumed. Implementing GST all these taxes will be removed hence interstate movement will get cheaper and will save a lot of time too. As per a report by CRISIL Analysis there will be a drop of 20% in Logistics costs. There will be complete phasing out of CST and removing of check-posts will give full benefits.

GST’s Impact on E-Commerce Marketplace & Online Sellers

Since demonetization the Government has been laying more emphasis on business to migrate online. Marketplace has given a platform to these sellers to reach a wider group of customers, which was out of question as an offline seller. As the government is transferring all procurements to the online portals it has encouraged the marketplace to add more sellers, making the trade bigger and along with it bringing specific GST laws for them. The bigger picture is that these GST laws might be a boon in disguise to most of them.

GST Registration

Though the Government has set laws for registration there is no such rule for the E-Commerce trade. All businesses using the e-commerce have to get registered under GST no matter what their turnover may be.

Composition Scheme

Most of the online sellers are either start-ups or SMEs. With the introduction of the composition scheme under GST Law the aim is to diminish the trouble of compliance for these SMEs. Unlike before businesses will have to file for return quarterly instead of monthly, where the tax they pay will be approximately 2%.

Transparency

The laws that come with implementation of GST will make it easier to extract bogus, low-quality and uncooperative sellers, where now you will have only honest and honest sellers. The competition ratio will be low, which will be a good thing. This will ensure transparency and help building trust.

Pricing Benefit will not be seen anymore

E-commerce companies take benefit of the merchants who are located in States with lower VAT. Like Karnataka’s tax rate on mobile phones is only 5% while in Maharashtra it is 13.5%, this kind of difference helps the marketplaces to compete better, but with GST that will no longer be the scene. It will also allow the local retailer to join the online platform and earn profits.

Tax Collection at Source – TCS

With the new laws of GST every marketplace operator has to deduct a % amount as the GST liability from the seller and give it to the government. This process is knows as Tax Collection at Source (TCS). This is more specific to electronic commerce and not the physical retail stores. The impact of this is that those who have not been paying the taxes will be found more easily.

Eliminating Tax Cascading

The dispute between goods& services tax classification will come to an end with single tax being implemented. It will give you the provision to withdraw or convert exemption into refunds. But there will be addition of major value when tax-credits through the value chain will make certain of elimination of tax cascading.

Single Tax Regime

With GST in place we will get see the e-commerce companies reaping many benefits. Currently there is a lot of paper work included in the supply chain system that is complex and time consuming, with GST all these complex things will be removed and paper work will be reduced. Following a single tax regime and being applicable in State as well as Centre you will see transparency and no difficulty in transportation for ecommerce because they have to do to inter-state business.

Partner with SMEs

Big E-Commerce companies are no longer forced to partner with local business to get good products for their customers. They can now easily partner with SMEs across the country. Which means now “Make in India” will take a rise.

Conclusion

All E-Commerce Industry Experts have welcomed the GST Laws with open hands, but the TCS might daunt sellers from coming online and registering themselves on the e-commerce platforms. This is going to be a wait and watch game until all have started following the GST Laws and then the actual figures will be out. As of now the virtual picture shows that the implementation of GST seems to be beneficial and a blessing to the E-Commerce Industry. Where few are going to be disappointed, the rest seem to already celebrating it.


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