The Good and Services Bill, 2014 received the President of India’s assent paving the way for the eventual replacement of multiple indirect taxes with a unified tax structure across India. Even the Cabinet has approved the formation of the Goods and Service Tax Council to be headed by the Finance Minister to meet the April 1, 2017 deadline for GST implementation.
GST is a value added tax levied at all points in the supply chain with credit allowed for any tax paid on inputs acquired for use in making the supply. Therefore, it is the end consumer who bears this tax.
While starting a new business in India, businesses currently have to get VAT registration from the State’s Sales Tax Department. Since, each State has different procedure and fees, it is difficult for businesses operating in multiple States to obtain and maintain VAT compliances.
With the implementation of the GST, the registration procedure would be centralized and businesses would no longer have to obtain multiple VAT registration as a single GST registration would be applicable across whole of India.
Currently, VAT registration and VAT payment is mandatory once a business crosses an annual turnover of Rs.5 lakhs in some States while Rs.10 lakhs in few others. The multiple VAT legislation enacted by each State creates confusion and complexities. Once GST is implemented, businesses with a turnover of less than Rs.10 lakhs would neither have to register nor pay GST. Further businesses with an annual turnover between Rs.10 – 50 lakhs may have to pay GST but at a lower rate.
Therefore once GST is rolled out, thousands of Startups having an annual turnover of less than Rs. 10 lakhs would be exempted from collection and filing of GST returns.