India is on the road towards transforming itself into a self-sustained global power in every facet. From introducing new policies in developing the infrastructure, to releasing new funds and grants towards the agricultural sector, the government is working towards bringing a phase shift in how things work. In this quest to work towards greater developments, the Rajya Sabha on the 8th of August, 2016 had cleared a constitutional amendment to implement the Goods and Services Tax (GST) in the country. Perhaps, the most significant and crucial economic reform in the country’s history; the implementation of GST is bound to affect all of us.
The present tax system of the country has its powers divided between the centre and the respective state governments. Both the governments have their respective areas where they can levy their taxes. In simple terms, the taxes levied on the provision of services or manufacture of goods come under the central government, and the taxes levied on consumption fall under the taxes levied by the state government. Though India is united politically, it is splintered economically. With multiple taxes being imposed by each and every state, the costs of products are bound to shoot up, making it increasingly difficult for businessmen to carry out their businesses with ease.
Will GST help?
The Goods and Services Tax (GST) is focused on removing the tax barriers for the businessman and the consumers by creating a single market. The single market will help buyers pay just one penultimate tax rather than paying hidden taxes which indirectly contributed to the price of the product. Considering all these aspects, buyers across the country will find it reasonable to pay a tax of 20% than paying hidden taxes. In short, the GST bill is bound to integrate the economic structure of the country, as it streamlines and consolidates the taxation process making it effectively simpler for everyone.
How will it help business entrepreneurs?
While the GST is bound to help the consumers in every aspect, here is a gist of how it could influence new business startup ideas by various business entrepreneurs.
Starting a new business would not be an onerous ordeal here on. The introduction of GST would eliminate all the cascading taxes one pays during the establishment of an organisation. By having a centralised registration process, the taxation process will be uniform, rid of all the complexity that increases at every state. The GST will also ensure the costs incurred in logistics reduces considerably, thanks to the ease in interstate movement of goods.
While the advantages of the GST are sizeable and considerable in every facet, not everything about the reform is a ray of hope for business entrepreneurs. The introduction of the GST brings about equal treatment for big corporates and existing startups, which going by the current business scenario, does not seem like an advantage for young business entrepreneurs. By implementing the GST, the tax exemption threshold for business units would see a significant reduction, ensuring that the startups falling under the reduced bracket would also have to pay the taxes. The removal of the safety net for the startup ecosystem might put young business entrepreneurs across the country under pressure.
However, business entrepreneurs who are looking at setting up new businesses in the sales & services sector would benefit from the introduction of the GST, considering how one need not pay two separate taxes. With calculations done in total by not distinguishing between sales & services, the implementation of GST will be extremely beneficial for businesses like restaurants among others.
What we deduced
The implementation GST is a revolutionary reform in the Indian economic scenario, where all the taxes are streamlined, making businesses more tax-compliant. The slightest alteration in the taxation process of a country like that of India will have a domino effect, influencing everyone from the top to the bottom. All business entrepreneurs must prepare for the changing tides and additional financial burdens that could be a result of the changing taxation patterns.
Latest posts by Srikanth Kanchinadham (see all)
- Franchising Your Business Startup Idea? Wait! Read This Before You Proceed - June 29, 2017
- Revolutionising Product Experience with Artificial Intelligence-Story of a Bangalore Startup! - June 22, 2017
- Augmenting Education: Studymarvel’s Founders On How They Are Bringing A Paradigm Shift In Education - June 13, 2017