Taxmantra CEO: GST to help in cost reduction

GST surely eases ways of doing business- right from clearing all road blocks for goods in reaching a certain place to reducing cost.

In an chat with Larry Bradley, Alok Patnia , CEO, Taxmantra.com, explains what GST means for startups. 

The positive impact on startups: Goods and Services Tax ( GST) is the consolidation of indirect taxes. It will definitely help in the ease of starting a business. Earlier, a business had to do multiple registrations for which they had to approach multiple authorities, say for VAT, service tax and excise. Now there will be consolidation and one authority will take care of all of it.

It will also be easy for startups to expand their businesses and open branch offices at different locations as they will not require to re-do compliances. Going ahead there will be no different tax rates for the same product in different states and this will make expending across the county easy.

Alok Patnia in one of his interactive sessions

Traders need to register for GST only when they have sale of Rs 20 lakh per annum, barring a few exceptions. This gives some relaxation to small businesses. Also, this threshold limit is across the table, unlike previously when it was Rs 5 lakh for VAT, Rs 10 lakh for service tax and Rs 1.5 crore for excise.

Logistics companies will get a lot of benefit. Earlier when goods were being moved from one state to another there used to be a lot of roadblocks and clearances which led to delay as there were different taxes imposed by different states. Now all of it will be taken care of by the system, leading to saving of time and money.

And finally, GST will remove multiple taxation and ensure that you do not pay taxes on taxes. This will lead to a reduction in overall price and the benefit will be passed on to the customer.  

Challenges: However, GST comes with a set of challenges as well. E-commerce players will need to register irrespective of the threshold limit.

Also there is the concept of reverse charge. So if I am dealing with an unregistered dealer, I have to create a self-invoice and pay GST. This is to force everyone to register; otherwise you will lose business.

Startups will face another challenge. Earlier in case of service tax, VAT and other taxes, startups would sometimes delay paying such taxes to make some more critical payment and later pay the taxes with a fine. In case of GST, the penalties are so high that no startup can afford to do so and this will impact their working capital. Taxpayers are to be rated on GST compliance and this means that people will avoid working with those who do not have a good rating.

In some sectors like services, GST would lead to the increase of prices in the short term as the tax rates are going to be 18 per cent. Small companies will take more time to adjust to the GST regime. They have to understand how GST will impact them and how they need to put a system in place to be compliant. They would need to factor in compliance costs and budget some expenses for it.

How GST has helped you in your business finances? Please share your views.