10/15/2017 GST – What the future holds for startups – VCCircle

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STARTUPS (HTTPS://WWW.VCCIRCLE.COM/INDUSTRY/STARTUPS/)

GST – What the future

holds for startups
By Archit Gupta (https://www.vccircle.com/author/archit-gupta/)
 10 April, 2017

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VCC Startups weekly

 (https://www.vccircle.com/gst-what-the-future-holds-for-startups/?
share=linkedin&nb=1)
wrap: Ola raises $1.1
bn; Flipkart puts
118
money into PhonePe,
eKart
 (whatsapp://send?text=GST%20-
%20What%20the%20future%20holds%20for%20startups
(https://www.vccircle.co
https%3A%2F%2Fwww.vccircle.com%2Fgst-what-the-future-holds-for-startups%2F) startups-weekly-
wrap-ola-raises-1-1-
bn-flipkart-puts-
money-into-
There was a time in India when being an phonepe-ekart/)
entrepreneur got you really sad looks, and a hopeless
marriage profile. Then the Silicon Valley found its
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10/15/2017 GST – What the future holds for startups – VCCircle

By Manu P Toms
second home in India, with Bangalore being the first (https://www.vccircle.com/auth
(https://www.vccircle.com/)
p-toms/) 
choice, and saying that you were the founder of a  1 day ago

‘startup’ became the new cool. What started in the

TMT
mid-2000s as a trickling bunch of California-bred NRIs (HTTPS://WWW.VCCIRCLE.COM/IND
Uber appeals decision
looking for greener pastures to spread their wings to revoke its London
licence
has now become a tour de force of innovation and (https://www.vccircle.co
technology, so much so that the government decided appeals-decision-to-
revoke-its-london-
to start its own scheme called ‘Start Up India, Stand licence/)
By Reuters
Up India’ in 2015 to give this rapidly growing sector a (https://www.vccircle.com/auth
 2 days ago
helping hand. It is a smart move to rope in and
formalise a chaotic industry that still managed to TMT
(HTTPS://WWW.VCCIRCLE.COM/IND
bring in $3.5 billion (Q2-Q3 2016) in angel and direct Fintech Valley Vizag
announces first batch
investments. of accelerator
programme
(https://www.vccircle.co
So, yes. The startup boom in India has begun full valley-vizag-
announces-first-
flow. We rank third globally with over 4,200 startups batch-of-accelerator-
programme/)
and the number is set to increase to 10,000 by 2020.
By Vijayakumar Pitchiah
The sector employs over 85,000 professionals and is (https://www.vccircle.com/auth
pitchiah/)
proving to be an important growth engine for India’s  2 days ago

economy and society. With around three startups PEOPLE

(HTTPS://WWW.VCCIRCLE.COM/IND
being born every day in the country, one just has to
MobiKwik appoints
ask – how will the new tax laws under goods and former Jabong exec as
payment gateway biz
services tax (GST) affect a sector that is probably the head
(https://www.vccircle.co
next best thing since the internet boom of the 90s? appoints-rukaiya-
rangwala-as-
payments-gateway-
biz-head/)

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10/15/2017 GST – What the future holds for startups – VCCircle

By Arti Singh
(https://www.vccircle.com/auth
What is really good about GST? (https://www.vccircle.com/)
singh/) 
 2 days ago
When GST goes live in July this year, many startups
are going to breathe a sigh of relief. Let me tell you TMT
(HTTPS://WWW.VCCIRCLE.COM/IND
why: Regulation needed for
Ola, Uber to ensure
women safety:
Increased limits for registration: Under the current Supreme Court
(https://www.vccircle.co
tax laws, any business that deals in goods and makes needed-for-ola-
uber-to-ensure-
a turnover of Rs 10 lakh per year has to register women-safety-
supreme-court/)
under the home state tax laws and get a tax
By Manu P Toms
identification number. For a service provider, this (https://www.vccircle.com/auth
p-toms/)
limit is set at Rs 9 lakh. The GST council however, has  2 days ago

chosen to set the limit for registration at Rs 20 lakh

(Rs 10 lakh for northeastern states and Uttarakhand).

Introduction of a ‘DIY’ compliance model: Startups

love DIY—whether it is writing code or filing tax. GST
aims to make taxation transparent and with all tax
processes going digital, startups that lack the
resources to hire tax experts or a dedicated team for
handling compliance can rest easy. From taxpayer
registration, return submission, to tax payments and
refund claims, startups can file details online.

Free flow of goods and services: According to

research done by Telecommunications Consultants
India Ltd (TCIL), a truck carrying goods in India covers
an average of 250-400 kms a day, compared with
https://www.vccircle.com/gst-what-the-future-holds-for-startups/ 3/9
10/15/2017 GST – What the future holds for startups – VCCircle

700-800 kms in European countries.(https://www.vccircle.com/)

Much of this is UPCOMING
EVENTS 
due to the long wait at checkpoints. While states have
asked for e-permits to replace the standard  27

transports bills instead of doing away with it OCT

News Corp VCCircle Foo
completely, one can hope that it will improve logistics Agri Investment Summi
2017
and speed of transport of goods. Four Seasons Hotel, Mumbai
(http://events.vccircle.com/
corp-vccircle-food-and-
agriculture-investment-sum
Tax credit on purchases: Startups in the service
2017)
industry have to pay service tax. Under GST, such
startups will be able to set off the VAT paid on their  29
purchases (say, on office supplies), with the service NOV
New Corp VCCircle FinS
tax on their sales which they cannot under current Summit 2017
Four Seasons Hotel, Mumbai
regime. For example, a startup buys office supplies (http://events.vccircle.com/
corp-vccircle-finserv-summ
worth Rs 20,000 paying 5%. It charges 15% service tax 2017)
on services of Rs 50,000. Currently it has to pay Rs
50,000 x 15% = Rs 7,500 without getting any
FOLLOW US ON
deduction of Rs 1,000 VAT already paid on stationery. TWITTER
Under GST (assuming GST= 18%) the calculation will
be:

No more confusing laws: Indian states have very

different VAT laws which can be confusing for
companies that have a pan-India presence, specially
https://www.vccircle.com/gst-what-the-future-holds-for-startups/ 4/9
10/15/2017 GST – What the future holds for startups – VCCircle

the e-com sector. For example, online websites (like

(https://www.vccircle.com/) Tweets about
Flipkart and Amazon) delivering to Uttar Pradesh, @vccircle

have to file a VAT declaration and the registration VCCircle

@vccircle
number of the delivery truck. Tax authorities #VCCirclePremium
SAIF Partners picks up stake
sometimes seize goods when there is a failure to in @Temasek-backed
#FMCG company |
produce required documents. Again, they are treated #PrivateEquity
goo.gl/2tDqcN
as facilitators or mediators by states like Kerala,
Rajasthan and West Bengal which do not require
them to register for VAT.
With GST, since it will subsume VAT and other taxes,
startups will only have to comply with a single 10m

nationwide tax. This should also enhance India’s manoj gupta

@munawa5406
ranking on the World Bank’s ‘Ease of Doing Business @vccircle @MobiKwik
@JabongIndia Please stop
Index’ where currently we rank at 130. supercash features in

GST – What the future holds for startups mobikwik

43m
High liquidity: Many bootstrapped startups face the

problem of having their capital stuck in tax refunds.
But with GST making the processes easier and faster,
startups can file for tax refunds online and hope to
get their money on time. Ergo, high liquidity.

The final word

It is important to note that the threshold limit of Rs
20 lakh (for registration) does not apply to startups in
the e-com sector. Startups in the manufacturing
sector may have a hard time, too, once the new laws
are in place as under the existing excise laws, only

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10/15/2017 GST – What the future holds for startups – VCCircle

those manufacturers with a turnover more than Rs

(https://www.vccircle.com/) 
1.50 crore have to pay excise. However, with the
implementation of GST, the turnover limit has been
reduced to Rs 20 lakh, thus increasing the tax burden
for many manufacturing startups. Despite this,
experts and industry analysts are hopeful that the
benefits of GST will outweigh its cons, and it will
prove to be a lucky charm for Indian startups. Fingers
crossed, amigos!

Archit Gupta is founder and CEO ClearTax.com. Views

are personal.

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