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Gst for Indian startups and e-commerce By Registrationwala

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GST INDIA: Impact Analysis
GST INDIA: Impact Analysis
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Gst for Indian startups and e-commerce By Registrationwala

  1. 1. Impact of GST on Indian Startups By: Mehak Chhabra (Chief Marketing Officer, Registrationwala)
  2. 2. Topics Impact on Indian startup industry. •The Good & Bad of GST •Impact of GST on e-Commerce startups •Invoicing guidelines checklist •TAX AUTOMATION •Conclusions •Queries session.
  3. 3. Introduction Goods and Services will usher in the biggest tax reform since 1947. It attempts at integrating all of India economically. And since it is being passed at a time where India has become a hub for budding entrepreneurs, exploring the effects of GST on Indian startups makes all the more sense. Currently, India has over 4000 startups and forms the third largest startup ecosystem in the world. Overall, startups should be happy that the GST bill has been passed.
  4. 4. The Good & Bad of GST
  5. 5. The Good of GST Taxation is simple •Every state currently has its own taxation rules and regulations, making the entire process a function of geography and hence very cumbersome. • GST attempts to simplify it all for the startups. •All the indirect taxes will be combined into one, making everyone pay only a single tax. •And as a consequence of GST's implementation, the tax calculations will be much simpler, saving time and energy, and encouraging the startups to invest it where it is much more needed.
  6. 6. The Good of GST Simple registration To start a new business, VAT registration is necessary but it is often a put-off to someone starting up. Different fees need to be paid in each state right now. With GST, there will be a uniform and a much simplified common registration for companies all across India. Entrepreneurs will need to just obtain one simple license. They can do their business in as many states as they like, just that they need to be paying their taxes. That is it. As simple as that. This should encourage the businesses to think about expanding, since the new format allows easier ease of business in other states too.
  7. 7. The Good of GST Improved logistics Logistics are a major headache to startups. Firstly, regular, sometimes unnecessary checks , at the border cause delay, resulting in the customer receiving the product late. And in a way, the customer pays for it - through time and money. Secondly, startups are not organized. What big players do is to stock-transfer goods in bulk, thus getting things done in a single delay and also avoiding paying charges of inter-state transit. Startups cannot afford that. They neither have stock-transfer nor do they have logistics in place to combat the delays. So they have to procure goods through inter-state sales, which makes them bound to pay central sales taxes.
  8. 8. The Bad of GST Startups with lesser turnover or startups in the manufacturing sector can have things complicated. According to the current excise laws, any manufacturing business with a turnover of less than INR 1.5 crore is exempted from paying any sort of duty. After GST comes in full force, this limit - which stands now at INR 1.5 crore - may be reduced to INR 25 lac, in turn killing many a small startups.
  9. 9. The Bad of GST Apart from the manufacturing sector, e-commerce sector will be affected too. Firstly,Tax Collection at Source, or TCS, directs the companies to file quarterly as well as monthly returns, making the compliance issues more complicated. Also, they will need to collect the taxes made from the portal, and it is not an easy job, given they have so many vendors. Secondly, ecommerce startups are going to suffer because the terms 'operators' and 'aggregators' have been vaguely defined. Operators will need to pay the taxes while aggregators will not need to.
  10. 10. The Bad of GST The extra documentation is set to creep in When GST is implemented, food prices may shoot up, forcing an inflation of sorts. Food taxes are set to suffer not only because of this, but also because there is no clarity whether "mandi tax" is included in GST or not. The extra documentation is set to creep in, which will kick up the administration costs, and the burden will ultimately be on the customers, who will be paying higher prices for the goods and services.
  11. 11. Conclusion Logistics, retail and automation sectors emerge as clear winners. They will hugely benefit from GST and its enforcement. Warehousing is the next in terms of benefit, as now the inter-state transit and trade taxes will be controlled by the Centre and are set to be reduced, making the entire process easier and cheaper. The future seems rosy but it is yet to be seen how GST individually impacts different sectors and the startups those sectors house.
  12. 12. Impact of GST on e-Commerce Startups
  13. 13. Introduction GST is a bill that will have far reaching impact on the economy and that impact will be a sum total on its impact on many of the live sectors in India, a country only second to China in terms of internet market. To put it simply, e-commerce basically means conducting any commercial activity using internet as a medium. GST attempts to address the issue by having a separate chapter on e- commerce but the proposed rules and regulations could lead to higher compliance challenges.
  14. 14. Who is under the umbrella? According to the chapter, an 'electronic commerce operator' is any person who owns, operates or manages an electronic platform that is used to facilitate supply of goods and services or in providing incidental information or services as per need.
  15. 15. Who is NOT under the umbrella? Any online retailer who supplies goods and services on their own behalf is not included under the definition of an electronic commerce operator. Thus, the process of tax collection at the source and other suggested compliances will not be applicable to them.
  16. 16. Key Issues Challenge 1 Higher compliance costs The GST law, will force every ecommerce player to collect tax at source and so deposit the applicable GST when payment is being made to the supplier. This will increase the compliance burden on many of the players as they work with a large number of vendors. Previously, ecommerce players used to be treated only as service providers and hence needed to comply only with a central service tax legislation.
  17. 17. Key Issues Challenge 2 Taxation of stock transfer GST says that under its regime, certain transactions will also be considered as supplies. Intra-state and inter-state stock transfers, between any two branches or any two warehouses of a single e-commerce entity, would be considered as supplies irrespective. Even though the tax paid will be available as credit, it may cause cash blockages. Like consider this: in case large quantities of goods are stock transferred, tax liability would arise first of all which can be counterbalanced only at the time of the final supply, causing a blockage in the cash flow.
  18. 18. Implications of GST Challenge 3 Credit available only on tax payment Credit, GST proposes, can only be asserted on the taxes which have been paid to the credit of the government.
  19. 19. Implications of GST Challenge 4 Valuation issues on discounts/incentives to continuous GST law suggests that the 'transaction value' is the total value of the goods and services in question. When it comes to discount's inclusion or exclusion, the case depends on the category it falls into. Discounts have been divided as pre-supply discounts and post-supply discounts. As is obvious, pre- supply discounts are those discounts which are allowed before or at the time of the supply. These will not be a part of the 'transaction value'. Post-supply discounts are allowed after supply and need to be included in the 'transaction value'. Cash backs and promo codes fall in post-supply discounts but they have not been clearly addressed to.
  20. 20. Conclusion Though the burden of compliance increases manifold, there are some significant advantages: •No cascading taxes GST will effect a hassle free transfer of credit across supply chains, resulting in major cascading of taxes, resulting in a lowering of the overall cost of supplies. •Consolidated tax rates In the GST regime, both central and state rates are to remain uniform, simplifying things majorly. A lesser number of disputes is always welcome.
  21. 21. Invoicing guidelines checklist
  22. 22. TAX INVOICE Checklist Every registered person required to issue the tax invoices containing the following particulars:- (a) name, address and GSTIN of the supplier; (b)a consecutive serial thereof, unique for a financial year; (c) date of its issue; (d) name and address of the recipient and the address (e) HSN code of goods or Accounting Code of services; (f) description of goods or services; (g) quantity in case of goods and unit or Unique Quantity Code thereof; (h) total value of supply of goods or services or both; (i) amount of tax charged in respect of taxable goods or services
  23. 23. TAX AUTOMATION
  24. 24. Tax Automation – What Does This Mean? You hear this phrase all the time now but what does it really mean? With rapidly changing technology, people and companies are all about automating their various functions and that’s a good thing as long as you know what you are automating and how to automate it correctly and efficiently.
  25. 25. Role of GSP and ASP in GST India GST in INDIA Goods and Services Tax (GST) is an indirect taxation in India merging 20 million existing taxpayers into single system of taxation. Technology backbone for GST in India is GSTN (the Government GST server) Why every GST liable business needs an ASP/GSP? To interact and file Tax returns every month, taxpayer will need a platform or software provided by any of the Application Service (ASP) provider registered under GSTN.
  26. 26. GSPs and ASPs: important constituents of IT ecosystem
  27. 27. Vital Check points to consider before appointing ASPs Since a major part of the support provided to a taxpayer in the GSP and ASP network relates to the enriched interfaces offered by ASP, taxpayers need to pay particular attention when choosing an ASP. FEATURES Providing a basic and convenient front-end interface for Taxpayers. Continuous and flawless services Single window to manage ITR, TDS and GST compliance Compliance filing as per GSTN guidelines. Value-added services, such as tax alerts, other business registrations and legal support, Billing Dashboard. Providing varied input options to upload invoice details to file returns. ByRegistrationwala
  28. 28. ASP’s will be processing raw data pertaining to a taxpayer’s sales and purchases Raw data provided by the taxpayer should contain all the sensitive information relating to the sales & purchases of the Organization, such as: •To whom does the taxpayer sell and where do the sales occur? •What does he sell? •How much does he sell and at what price? •From where and from whom does a taxpayer purchase? •What does he buy? •How much does he buy and at what price? ByRegistrationwala
  29. 29. The problem Data privacy and protection An Asp’s ability to strictly maintain data privacy under properly drafted non-disclosure agreements, data security strengths, and the ASP’s arrangements for the protection of shared data. Value-added services The extent to which an ASP provides other value-added services, such as trend analysis, tax alerts, and legal support. Data retrieval and audit trail An ASP facility for data retrieval are very important, especially given the statutory requirements for record preservation. For a taxpayer to justify claims before tax authorities, an audit trail must be available.
  30. 30. Conclusion An important part of GST compliance will be filing data with the GSTN. An IT ecosystem under GST, through a network of GSPs and ASPs, will help corporate and tax consultants achieve better data-based compliance under the GST regime. Registrationwala is an ASP partnering with TAXMANN (GSP) in India to provide cloud-based, GST compliance solutions to business corporations and accounting firms.

Hinweis der Redaktion

  • The Good & Bad of GST Impact of GST on e-Commerce startups Invoicing guidelines checklist TAX AUTOMATION Conclusions Queries session.

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