Another four months and entrepreneurs big and small will fall under a unified tax regime in India. The national structure for tax called the Goods and Services tax will be implemented from July, 2017 if nation’s Economic Affairs Secretary is to be believed.
Touted to make businesses’ taxation seamless, the Central government will compensate states for any loss of revenue. Rates for diverse goods and services will be fixed under four categories - 5, 12, 18 and 28 per cent.
What Entrepreneurs Should Watch For:-
India is the next Silicon Valley of the world when it comes to startups who are experimenting with all sectors to cater to the changing requirements of Indians & the world.
The goods and services tax on startups will simplify the process of taxation by bringing uniformity in the process. Centralised registration of new businesses that are looking to diversify in various states will give the community a big boost.
Businesses with average turnover between INR 10 lakh - 50 lakh are expected to be taxed at a lower rates and will likely encourage newer ventures.
No differentiation between sales and services for taxation under GST which will reduce the burden on small businesses as the tax calculation will be done on total. Small traders’ interest will be met owing to threshold for Central GST for goods at INR 1.5 crore and the threshold for services to also be high.
Being tax neutral, GST will eliminate border tax procedures and toll check posts and encourage supply of goods across borders. According to a CRISIL Analysis report last year, the logistical cost for companies manufacturing bulk good will be reduced by around 20%. This will give a big boost to SMEs.
Big businesses that deal with luxury items have a reason to cheer. Tax neutrality results in luxury goods and other goods to be treated on the same scale and hence luxury items will not attract higher taxation as before.
The import of all goods and services will fall under a central GST as well as a state GST. Goods and services tax that will be are imposed will have to be paid for in the state that they are going to be consumed in. Complete set-off is expected to be available on GST paid on import.
Goods produced out of India will become cheaper owing to the phasing out of central sales tax. This would in turn mean companies overseas would be interested in manufacturing in India. Additionally, Indian-made goods may stand to become cheaper in the international market, making it a lucrative time for manufacturers.
Post GST, exporters will fairly be paying lower tax.
While many argue the cost of product and services will increase for the consumer due to GST being levied on supply, many are of the belief that a significant fall in the burden of taxation on goods would end up benefitting consumers.
The cascading effects of CENVAT and service tax are expected to be more removed with a continuous chain of set-off from the producer to the retailer.