The Goods and Services Tax or GST took a long time to come to India but when it did, became a game changer. It changed the business landscape as it redefined how new businesses can be established and run. In order to be eligible for GST registration, it is mandatory to offer your products and services across states or operate through an e-commerce platform.
It is compulsory to register for GST for startups in most cases including –
- If your business turnover exceeds INR 40/20 lakhs for goods/services while making sales to normal category states, you are required to register for GST. If you are covering special category states like Puducherry, Meghalaya, Mizoram, Tripura, Manipur, Sikkim, Nagaland, Arunachal Pradesh and Uttarakhand your threshold limits for GST registration stand at INR 20/10 lakhs.
- If the business had Pre-GST tax registrations like VAT, Excise, Service Tax etc
- If you fall under the definition of a casual taxable person, GST registration is required. This is applicable if you want to sell your products or services at events or exhibitions without a fixed location. You will need to pay GST based on the estimation of sales for 90 days. A temporary GST registration is valid for 90 days.If you are a Non-Resident taxpayer
- If the startup/entity is paying taxes under Reverse Charge Mechanism
- E-commerce Aggregator Startups
- Businesses using e-commerce platforms or supplying to e-commerce aggregators
- If your business deducts TDS/TCS
- If you are a Data access or recovery service provider.
- If you are a supplier agent or input service distributor GST registration is needed to carry forward the input tax credit benefit.
- If you are a Non-Resident person planning a startup in India, you will need GST registration
The purpose of GST was to eliminate multiple indirect taxes and bring them under one umbrella. The GST compliance procedures have been simplified to provide ease of business, especially for startups, GST ranges from 0 to 28% depending on the type of goods and services being sold.
The increased GST threshold has benefited several small businesses in India. By establishing a composition system the government has ensured that businesses with a yearly turnover of less than INR 1.5 crores qualify for a lower tax.
What are the benefits of GST registration?
Input Tax Credit on Purchases
Purchases will be eligible for Input Tax Credit which is one of the main reasons why startups should register for GST at the outset even if they are below the threshold levels.
Businesses providing services make up a major portion of Indian startups. They used to collect and pay service tax to the government but there was no option to deduct the state VAT paid from the service tax. Such contradictions have been remedied after the introduction of the Goods and Services Tax. If a startup pays GST on the purchase of office stationery they can get an Input Tax Credit for this on the tax they pay on sales.
Legitimate Business Entities
Businesses that register for GST are automatically recognized as legitimate business entities. GST registration status gives legal status to the startup.
Edge Over Unregistered Rivals
GST registration will help startups compete with unregistered businesses and give them a superior edge.
Tapping e-commerce Potential
GST registration is mandatory if you are planning to sell your products or services on Amazon, Flipkart, Paytm, Shopify or your own website. It is prudent to have a GSTIN when you start your business.
PAN India Sales
Having a GST registration gives you the freedom to sell across states which can be a great advantage to new businesses as it provides scope for expansion. In an interconnected world linked by the internet, a GST registration makes it really easy for businesses to spread their wings and attract customers irrespective of their geographical location.
Access to More Business Opportunities
Government tenders are open only for GST-registered businesses. So there is a chance of missing out on lucrative business opportunities if you do not have a GSTIN.
Since the process of GST registration is very simple and the benefits are numerous, it makes business sense to register for GST as soon as you create a startup. The GSTIN is a 15-digit alphanumeric code that identifies your business and opens avenues for you.
Easy Process of Registration and Tax Filing
The process of GST registration is very simple as it is no longer manual. It is a completely digital process. You can get your GSTIN in seconds if you are able to complete your paperwork correctly. You would need the following documents for GST registration.
- PAN Card of the business is required to get a GST certificate. The GSTIN is a state-specific 15-digit identification number which comprises the state code, PAN number, entity code and check digit.
- Proof of identification like PAN Card, Driving Licence, Passport or Voter ID card
- Proof of address like Aadhaar Card, Rental Agreement, Property Tax or Utility Bill Receipt
- Proof of Bank Account like the Bank Statement
Though startups may be able to do business without GST if they don’t meet any of the conditions mentioned above, it would be very limiting for the business. If a startup is looking at rapid growth and expansion, it makes tremendous business sense to register for GST at the beginning itself to extract the real benefits of a PAN India business.
Startup Movers can offer professional services for your new business by helping you apply for a GST registration and complete the necessary formalities. To know more about Startup Movers and the services they provide, you can call them on 7011808002 or visit them at www.startupmovers.com.