GST : A CATALYST FOR GROWTH IN THE STARTUP AND SMALL BUSINESS ECOSYSTEM OF INDIA

INTRODUCTION

The inception of the Goods and Service Tax (GST) heralded a significant shift in India's taxation framework, streamlining and simplifying processes nationwide. With its motto of 'One Nation One Tax', GST aimed to alleviate the compliance burden, particularly for startups and small enterprises grappling with India's intricate tax regime. This article delves into the multifaceted advantages that GST provides to these businesses, elucidating how it fosters efficiency in both financial management and operations.

In the discourse surrounding GST, it's imperative to underscore the significance of accessing reliable, authoritative sources of information. GST literature, packed with the most recent insights, analyses, and real-world examples, emerges as an indispensable tool for those seeking to navigate the tax landscape with precision. These publications not only clarify the intricacies of GST and its ramifications for small businesses but also ensure stakeholders are up-to-date on the latest tax developments, perks, and regulatory revisions, thereby facilitating informed decision-making and adherence to regulations. As we explore the specific benefits of GST for small enterprises and startups, let's also acknowledge the invaluable role played by these comprehensive manuals in enhancing our comprehension and implementation of tax legislation in India.

1.    Threshold Limit For Registration Under GST

Section 22 of the Central Goods and Service Tax Act of 2017 (CGST Act) stipulates the threshold for GST registration.

Under this provision, GST registration becomes obligatory for a business entity solely when its yearly turnover surpasses Rs 20 lakh (or Rs.10 lakh for the States of Manipur, Mizoram, Nagaland, and Tripura).

Nevertheless, there exists an added advantage of a threshold cap of Rs 40 lakhs for taxpayers solely involved in the intra-state supply of goods. It's essential to emphasize that this ceiling is not applicable in scenarios where mandatory registration is mandated under the Act or if an individual is involved in supplying specified goods or conducting inter-state or intra-state transactions in the States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Telangana, Tripura, Uttarakhand.

Significantly, if an individual derives interest or discount income from deposits, loans, advances, etc., they would still be categorized as solely involved in the supply of goods. Put differently, they are eligible to benefit from the threshold cap of Rs. 40 lakhs.

Small service providers making inter-state supplies not liable for mandatory registration.

In accordance with GST regulations, registration is obligatory for suppliers engaged in inter-state transactions. However, individuals providing taxable services across state borders with an aggregate turnover of up to Rs. 20/10 lakhs in a financial year are exempted from compulsory registration under section 24 of the CGST Act.

2.    Availability Of Composition Scheme - Reducing The Compliance Burden

The composition scheme streamlines GST adherence for small taxpayers, offering an optional framework for eligible individuals. Those qualified for this scheme are those whose aggregate turnover in the preceding year does not surpass Rs 1.5 crores, or Rs. 75 lakhs if registered in the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Telangana, Tripura, Uttarakhand.

Under the Composition Scheme, taxpayers must remit tax at a predetermined rate based on their turnover, rather than adhering to the standard GST rates applied to different goods and services. Additionally, they are ineligible to avail themselves of input tax credit (ITC) on purchases.

Threshold in case of special composition scheme for a service provider.

Typically, the composition scheme is unavailable to service providers except for those offering restaurant/catering services. However, the Finance Act 2019 introduced a distinct composition scheme for other service providers. This scheme is open to all registered individuals not included in the standard composition scheme, with an aggregate turnover in the preceding financial year not surpassing Rs. 50 lakhs.

Eligible Persons Are Entitled To Supply Of Services Upto Specified Quantum.

Individuals involved in service provision typically cannot access the composition scheme, except for those in the restaurant/catering sector or those covered under the special composition scheme. However, the second provision of section 10(1) of the CGST Act offers an exemption based on the higher of the following amounts:

• 10% of turnover in a State or Union territory in the preceding year;

• Rs 5 lakhs.

Furthermore, the GST law provides that the value of interest/discount on deposits, loans or advances would not be considered for determining the above limits.

Suppliers of goods under the composition scheme will eligible to conduct supply through E-Commerce Operators (ECOs).

Typically, suppliers operating under the composition scheme are prohibited from conducting transactions via E-commerce Operators (ECOs). However, the Government, via Notification No. 28/2023-Central Tax dated 31-07-2022, stipulated that starting from 01-10-2023, suppliers of goods enrolled in the composition scheme would be permitted to conduct transactions through ECOs.

Compliance requirements for the suppliers who are opting for a composition scheme

They need to submit quarterly returns instead of monthly ones, thus lessening the burden of compliance. Additionally, because the aggregate turnover of those selecting the composition scheme always stays below Rs. 2 crores, there has never been a necessity to provide an Annual Return to date.

3. Threshold Limit For Compliances Under GST

3.1. Option of Quarterly Compliance to small businesses instead of monthly

Rule 59 of the CGST Rules states that a taxpayer with a turnover of up to Rs. 5 crores can submit the outward statement quarterly, yet the tax must be paid monthly. This provision aids in lowering the compliance expenses for small taxpayers.

3.2. Form GSTR-9 not compulsory for turnover upto Rs 2 crores.

Section 44 of the CGST Act, in conjunction with Rule 80 of the CGST Rules, stipulates that individuals must submit the Annual Return if their aggregate turnover surpasses Rs. 2 crores. Additionally, the government has granted the option of filing GSTR-9 to taxpayers with turnovers of up to Rs. 2 crores for the respective financial year.

3.3. Form GSTR-9C not mandatory for tunover upto Rs. 5 crores

According to GST regulations, any registered individual with an aggregate turnover exceeding Rs. 5 crores must provide a self-certified reconciliation statement using Form GSTR-9C. Hence, taxpayers with turnovers of up to Rs. 5 crores are not obligated to furnish a reconciliation statement.

4. Benefit of an exemption in case of service provided by an incubatee

Notification No 12/2017- Central Tax (Rate) grants an exemption for services rendered by an incubatee up to a total turnover of fifty lakh rupees in a financial year, contingent upon the following conditions:

• the total turnover had not exceeded fifty lakh rupees during the preceding financial year;

• a period of three years has not lapsed from the date of entering into an agreement as an incubatee.

5. Other Points

5.1.ECO shall be liable to pay GST under section 9(5)

Section 9(5) authorizes the Government to designate specific categories of 'services' for which GST payment is to be made by the ECO rather than the actual service provider if the service is supplied through it. This provision alleviates the compliance burden for taxpayers who offer services via ECOs.

5.2.Streamlined Compliance with online processes.

Under GST law, processes such as GST registration, return filing, and other procedures are conducted digitally, streamlining compliance and saving taxpayers considerable time.

CONCLUSION

In summary, the implementation of GST in India stands as a transformative reform, particularly advantageous for start-ups and small enterprises, streamlining taxation and alleviating compliance challenges. The GST framework introduces diverse registration thresholds and composition schemes, effectively reducing the burden of adherence. Additionally, it offers benefits like quarterly compliance alternatives for small businesses, nurturing an environment conducive to their expansion and development.

It would be safer to say that the introduction of GST in India marks a significant milestone in tax reform, notably benefiting start-ups and small businesses by simplifying the tax structure and easing compliance burdens. This transformative framework offers a range of registration thresholds and composition schemes tailored to mitigate the complexities of taxation. Notably, small enterprises can now opt for quarterly compliance options, significantly reducing administrative hurdles and fostering an environment conducive to growth. Moreover, the GST regime promotes transparency and efficiency through its digital infrastructure, enabling seamless processes such as registration and return filing. Overall, GST has ushered in a new era of taxation, empowering businesses of all sizes to thrive in a more streamlined and conducive regulatory landscape.