GST Registration is an indirect taxation system in India. It is completely online and thus offers several advantages for startups. Many entrepreneurs also opt voluntarily for GST Registration in India for several reasons. In this article, you will learn Is GST Registration required for startups?
What is a Startup?
In simple words, Startups are companies that are still in the early phases of business. When one or more entrepreneurs get together with the goal of creating something new and innovative, they form a startup.
These startups have a company formation from the following options:
- Private Limited Company Registration
- LLP Registration
- One Person Company Registration
- Sole Proprietorship Registration
- Partnership Firm Registration
Innovation is at the heart of any startup’s mission, whether it’s to improve upon or invent totally new categories of goods and services, upending long-established business models and paradigms in the process. The term “disruptor” has also been used to describe a number of companies.
In India, startups can have Startup India Certificate and avail the of several benefits.
What is GST?
Goods and Services Tax (GST) is a value-added and indirect tax. It covers all stages of the supply chain and offers tax rebates on inputs. Thus, the final consumer or organization in the value chain is liable to pay taxes. The tax system applies to both the central and state level and every business as per the eligibility criteria must obtain GST Registration.
The introduction of the Goods and Services Tax (GST) in India has had a significant influence on the way startups operate. Certain indirect taxes have been eliminated, and everything has been grouped together under the GST umbrella as a whole instead.
To know more about GST Registration, you can read our guide at-
Is GST Registration required for Startups in India?
Yes, GST Registration is required for Startups in several cases including:
- Had Pre-GST tax-registrations ( Excise, VAT, Service Tax etc.)
- The business has an annual turnover of more than Rs. 40 Lakhs and Rs. 20 Lakhs in the North-Eastern States( J&K, Himachal Pradesh and Uttarakhand)
- Casual Taxable Person
- Non-Resident Taxable Person
- Startups paying taxes under Reverse Charge Mechanism
- E-Commerce Aggregator Startups
- Startups supplying products or services on E-Commerce Portals or to E-Commerce Aggregators also need to apply for GST Registration and do GST Return Filing
- TDS / TCS Deductor
- Data access or recovery service provider
Advantages of GST Registration for Startups
- Multiple VAT registrations are no longer necessary for businesses.
- GST has a threshold of 40 lakhs, which means that many small businesses, including start-ups, don’t have to get GST Registration. Although it is voluntary, the GST offers a reduced tax rate for small enterprises with a turnover of between 20 Lakhs to One crore. This is referred to as the composition scheme under GST. This will ease the burden of taxation on new firms.
- Registration, GST Return Filing, and payment of GST are all handled entirely online. Startups don’t have the hassle of running around tax authorities to register for Excise, VAT and Service tax.
- The internet is a common platform for entrepreneurs to sell their products and services. Inter-state transportation of products is not a problem because GST is implemented across the country. You can learn more about it at – GST Registration for E-Commerce
- To be compliant with both the Value Added Tax (VAT) as well as the Service Tax (ST), firms who supply both products and services must pay both taxes. This complicates the business and requires them to calculate taxes based on different rates for different things. GST eliminates the distinction between goods and services, making it simpler for businesses to comply.
- Additionally, invoicing is simplified for startups due to the use of a single rate of GST.
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