Impact of GST on Indian Economy

Goods and Services Tax (GST) is an indirect tax reform which aims to remove tax barriers between states and create a single market. For that to happen the constitution first needs to be amended to remove different layers of governments’ exclusive powers to levy taxes. Once this step is taken, the tax barriers between states, and centre and states will disappear.

MAJOR CHANGES WITH THE INTRODUCTION OF THE GST :

1) Central taxes such as Central Excise duty, Additional Excise duty, Service tax, Additional Custom duty and Special Additional duty as well as state-level taxes such as VAT or sales tax, Central Sales tax, Entertainment tax, Entry tax, Purchase tax, Luxury tax and Octroi will subsume in GST.

2) Provision will be made for removing imposition of entry tax /Octroi across India.

3) Entertainment tax, imposed by states on movie, theatre, etc., will be subsumed in GST, but taxes on entertainment at panchayat, municipality or district level will continue.

4) Stamp duties, typically imposed on legal agreements by states, will continue to be levied.

5) The GST structure would follow the destination principle. Accordingly, imports would be subject to GST, while exports would be zero-rated. In the case of inter-state transactions within India, State tax would apply in the state of destination as opposed to that of origin.

6) The GST regime should have a dual rate structure – low GST rate of approximately 12 per cent on merit goods (e.g. essential commodities), and standard GST rate of approximately 18 per cent on other goods. That apart, it is expected that there may be a higher GST rate of approximately 40 per cent on a few demerit goods (like tobacco, aerated beverages, etc.), lower GST rate of approximately 2 per cent on billions, and exemption from GST on a few select goods.

7) With GST, there will be a significant shift from origin-based taxation to a destination-based tax structure impacting not only the operating business models but also the revenues of the centre/states.

8) Company Registration under GST would replace most indirect taxes currently in place such as:

Central Taxes

Central Excise Duty [including additional excise duties, excise duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955]

Service tax

Additional Customs Duty (CVD)

Special Additional Duty of Customs (SAD)

Central Sales Tax ( levied by the Centre and collected by the States)

Central surcharges and cesses ( relating to supply of goods and services)

State Taxes

Value-added tax

Octroi and Entry tax

Purchase tax and Luxury tax

Taxes on lottery, betting and gambling

State cesses and surcharges

Entertainment tax (other than the tax levied by the local bodies)

Central Sales tax ( levied by the Centre and collected by states)

HOW WILL GST HELP INDIAN ECONOMY?

1) GST Registered would help in lesser corruption and with Increased Tax Revenue.

2) Better and improved economy with single taxation will make it easier to identify the tax defaulters.

3) Goods Service Tax Registration will lead to the creation of a unified market, which would facilitate seamless movement of goods across states and reduce the transaction cost of businesses.

4) Tax evasion will be reduced with lower tax and lower cost will result in better investments in manufacturing industry.

5)One tax instead of so many different taxes will make tax compliance’s easier.

6) Increased investments in manufacturing industries and lower cost will result in increased volume of exports.

7) Divination of burden of tax between goods & service industries.

HOW WILL GST HELP CONSUMER?

Today consumers have no idea about the extent of taxes they pay on goods. If you get a bill after buying merchandise which gives the extent of VAT you have paid, it is an understatement of the actual tax you have paid. Remember, well before merchandise reached the retail outlet, the central government has collected excise duty. The extent of excise duty is not mentioned in the bill.

1) GST includes goods as well as service tax. Presently, service tax is 15% and taxes applicable to manufactured goods as sales tax, CST, VAT, Excise etc. if applicable amount to 24—25%. After implementation of GST, it is recommended that tax will be flat @18%.

2) Price of services may go high. Elimination of multiplicity of taxes and their cascading effects.

3) Price of goods may go down with the less complexity in tax structure.

4) Imported goods may become more expensive as CVD & VAT @12.8%, while after application of GST tax rate will be @18%.

5) Manufacturers can avail tax credit, which will result in reduction of cost, and consumers will get goods at fair price.

The country is eagerly looking out for the roll-out of GST from April 2017, as the regime focuses on creating one single market for all and introduces destination based taxation. GST will attract more investments from foreign investors as the country shall be more industry- friendly. Also, this shall result in generating more employment opportunities. Therefore, it is imperative that the government makes efforts to make the law clear and industry friendly so that the industry and the economy benefits as a whole.

India Startup.in would be always happy to help you with Company Registration services, LLP Registration, Partnership Registration in Bangalore. Our team consists of lawyers, chartered accountants and company secretaries. We believe experience, service and results are the pillars of success. Be a part of the growing India’s startup ecosystem. Talk to our consultant to know more and get started.

Call us at +91 87227 50204 or email us at info@indiastartup.in for more information.

We look forward to working with you.

Reference Article : http://www.indiastartup.in/impact-of-gst-on-indian-economy

Similarities of an Limited liability Partnership and a Private Limited Company

Limited Liability

Both LLP and a Private Limited Companies have limited liability. Liability of partners of an LLP is limited to the extent of the agreed capital contribution in the LLP. Similarly, Liability of shareholders of a private limited company is limited to the extent of shares held.

For example, if Sam invested Rs 100,000 to start a private limited company. Sam’s liability is the investment of Rs 100,000. In other words, the potential loss cannot be beyond Rs 100,000. Sam won’t be liable for any liability beyond this Rs 100,000.

Similarly, in an LLP, the liability of Sam will be to the amount he has invested in the LLP and nothing more. However, the LLP will be liable to the full extent of its assets.

Body Corporate

LLP and Private Limited companies are body corporate and a legal entity separate from its partners and shareholders. LLP, similar to a private Limited company, is capable of entering into contracts and holding property in its own name.

Perpetual Succession

It has perpetual succession. Which means the LLP can continue its existence irrespective of changes in partners. Partners may come and go but the LLP continues to be in existence.

The same is the case for a private limited company, shareholders have the option to transfer their shares to another person and exit. However the company still continues to be in existence.

Reference Article : http://www.indiastartup.in/similarities-of-an-limited-liability-partnership-and-a-private-limited-company/

India Startup Company Registration Firm

Start Up India Action Plan 

The launch of this plan was good music to ears of such people who had dreams of pursuing their own business, but did not have the funding required. The scheme ‘Start Up India Action Plan’ was launched because the Prime Minister of India strongly felt that our country has a lot of potential but what was badly needed was a ‘push’ to make those potential ideas grow in the form of new entrepreneurship. Such new potential ideas can now indeed be turned into entrepreneurship and also receive a loan for the startup of the business, provided the idea, process or service is one of its kind or points towards improvement of similar existing ideas, processes or services. 

On 16th January, 2016, Startup India Action Plan was launched by India’s Finance Minister at Vigyan Bhawan, New Delhi. The plan or scheme spoke about improving the country’s economy and generate large scale employment opportunities by encouraging more entrepreneurship and formation of new companies, partnerships and LLPs. The funding for eligible plans is to be provided by the Government through international banks and other financial institutions who are lending financial assistance for the scheme. 

What exactly is Startup India Action Plan all about? 

Startup India Action Plan is an initiative taken by the Government of India for better economic growth, to nurture innovation, generate more employment and to build a strong eco system. 

Every new innovative idea which is promising and commercial in nature can now shape up into the form of a new entrepreneurship. 

The plan wants to encourage women entrepreneurs, hence, credit facilities are offered at lower rates to Women entrepreneurs and backward classes.

Startup scheme applies to a wide array of sectors from digital and technology to agriculture, healthcare, education etc. 

The plan applies to Tier 1, 2 and 3 cities and also semi-urban and rural areas. 

The eligibility for the plan is restricted to new products, processes or services or an improved version of the same. 

Apart from being commercial in nature, the product, process or service must also have value for workflow or value for customers. 

Advantages of Startup India Action Plan 

Any new idea working towards innovation, commercialization of new products/services/processes, development or deployment has a new ray of hope to convert into entrepreneurship under this scheme. 

Startup India Action plan aims to empower Startups to grow through innovation and design. 

Easy Registration/E-registration available. 

80% reduction in the application fee. 

Income Tax relaxed for the first three years.

 A dedicated web portal and mobile application will be developed.

 First three years to be inspection free. 

Easy exit policy available. 

Female applicants and backward communities have special rates and arrangements. 

Launch of self-certification system. 

The scheme is available for a wide array of sectors like digital, technology, agriculture, healthcare, education, manufacturing etc. 

With Startup India Action plan coming into effect from April 2016, many new companies are expected to come into the market. Such new companies/entrepreneurship will need assistance for company registration, trademark registration, sales tax, and vat and establishment registration. To render such assistance, we have India Start-up - a company which helps new entrepreneurs establishes their venture effectively in the market. India Start Up can be described as a one-stop service organization which renders complete assistance to do with registration of companies and takes care of legal procedures/formalities. India Start Up also assists in other areas like converting a Private Limited Company to an LLP, tax computations, sorting out VAT related queries and so on. For new business startups who want to tie up things fast and at a reasonable pricing, there can be no better choice than India Start-Up where one can expect value added services at a very low cost.

The following is a list of documents required for company registration of a Private Limited Company, Partnership companies, Limited Liability Partnership and One Person Company:

PAN of the Directors
Address Proof (copy of Passport/ Voter's ID/ Driver's License/ Bank Statement)
Passport Size Photographs
Address Proof of the place of business (copy of the rental agreement or electricity bill)

 For registration of Trademark of the company, the procedure requires: 

Submission of Logo Design
Power of Attorney.