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GST : Impact on Technology and Startups in India

GST

The Goods and Services Tax which is commonly known as GST is all set to roll out in India on the 1st of July. Earlier in June, the GST council decided to put almost 1200 goods and 500 services under 4 tax slabs which are 5%, 12%, 18%, and 28%. GST has taken the country by storm and is believed to boost up the economic integration of the Indian economy. Everyone is hoping that the modernization and amalgamation of the process of indirect taxation will be much easier and efficient. It will certainly prove to be a relief for the taxpayers. With the rolling out of the GST bill, it is expected that the taxpayers will pay a single combined tax instead of paying taxes like State Value-Added Tax (VAT), Central Excise, Service Tax, Subsidiary Taxes and Octroi.

As we know by far, that this GST tax will be applicable to sales, consumption, and production of goods apart from services at the Central and State Government levels. So, it is assured that the difference between Goods and Services will be progressively made low to make the tax compliance easier. Although, it is a really great step towards progress with the implementation of the GST bill as almost all the developed countries use this form of taxation. This form of taxation not only gives us ease and convenience but also let us avoid double taxation. The GST Bill will be implemented to the transaction value including the packing cost, contract and any other expenses incurred for sales.

Furthermore, all the other States are supporting this new initiative, but the Tamil Nadu Government is not so much with the support of the GST Bill. According to them, this bill might take away the independence of the State Government. However, people all over India have a lot of queries and confusion as to what is going to happen after 1st July. Some of the frequent questions we came across were: What impact it will have on the Startups and technology consumer? Can we expect our next gadget to get more expensive or cheaper? Should we go for it or wait for the GST to roll out for buying any new electronic appliances? So, relax and take a deep breath, because I am going to solve all your queries by explaining the impact of GST on your tech life.

1.Electrical Appliances

(Television, ACs, Washing Machine, Refrigerator, Vacuum Cleaners, etc)

The prices of all the electrical appliances are going to shoot up after the GST Bill rolls out. The above-mentioned consumer durables are going to get expensive after July 1. These prices will get inflated as these goods will now come under the highest tax bracket of 28%. Accordingly, we can expect the price rise of 4% or more. The other home appliances like electric irons, mixer, juicer, etc will also get inflated as all of these come under 28% tax slab. However, in Mumbai, we can expect a price down as they had an additional Octroi of 5% previously.

2.Smartphones

 (Phones, Landlines, Manufacturing Parts, etc)

You might not believe me, but the Smartphones are definitely going to get cheaper in the near future after the GST Bill implements. This is because the current tax imposed on the phones is more than 13.5%. The GST Council has now put them under 12% tax bracket which will automatically bring the price down. Not even this, the manufacturing parts of the Smartphones are also considered under the new 12% tax slab. Including this and Make In India initiative will eventually make the brand specific Smartphone prices less. Along with this, Landline, telephones and all the other devices including wireless and wired networks both will be categorized under the 18% tax bracket.

3.Entertainment

(Cable and DTH Services)

The entertainment taxes which are currently imposed by the State Government will be absorbed in Goods and Services Tax. As of now, every state almost levies the entertainment taxes around the 10% to 30% range on the Cable and DTH services. They also apply an additional service tax of 15% on entertainment services. But now, all these services will be included under the same 18% GST slab which will lower down the tax.

 4.Cab Services

The regular users of OLA and UBER are utterly confused as how much will be the Cab Services affected after the GST implementation. Although everyone is super tensed about the prices going high the surprise for you is that taking an OLA or UBER will be marginally cheaper after the GST is imposed on them. These services will drop down to 5 to 6% after the GST.

5.Telecom Services

The sad news is that the phone bills as in the prices of telecom services might shoot up. The current tax on telecom services is 15%. The Goods and Services Tax will add another 3% to the telephone bills which will further decrease the profitability of telcos. To make it more clear, if you are currently paying a phone bill of Rs.1000 then it will get a hike of Rs.30. Similarly, for the prepaid users, you currently get a talk time of Rs.85 when for Rs.100, after the GST you’ll only get Rs.82 as the talk-time at the same price.

6.Speakers, Camera, and Monitors

Digital Cameras, Video Cameras, Television Cameras, Recorders, Projectors and Cameras of any kind come under the highest tax slab in GST. The Goods and Services Tax imposed on these goods is 28%. After the implementation of GST, goods like Monitors, Loudspeakers, and Speakers will also be included in the same 28% tax slab.

7.Other Electronic Items

Let me tell you the GST rates for other miscellaneous electronic items, devices, and gadgets. The Electric Lamps, Water Heaters, Hair Dryers, Curlers, etc will be included in the 28% tax bracket. Along with this, Photocopiers, Printers, Ink Cartridges, Fax Machines, etc will also come under the 28% tax slab. And, the storage devices will have the 18% tax bracket.

8.Impact on Startups

I hope I managed to solve some of your queries about how the GST is going to impact the technology. Now, let’s take a look at some of the major impacts of GST on Startups in India. We will talk about three crucial points here focusing on the Impact, Relief, and Revenue.

How will it impact the Infant Startups?

Currently, the business that has gross revenue of more than Rs. 5 lakhs must have VAT registrations and pay the Value Added Tax. Now, the GST will limit this to Rs. 10 lakhs or above. However, the industries that have a turnover of Rs. 10 lakhs to Rs. 15 lakhs will have lower tax rates. So, this, in turn, will definitely lower down the tax burden on infant businesses. Along with this, GST is supposed to make it easy for new business launch. For instance, currently, new businesses should have VAT registration from sales tax department along with a number of procedures and incurred fee in the different state. But, after the implementation of GST, it will bring more uniformity in the current procedure. Furthermore, it will enable centralized registration which will encourage entrepreneurs for business startups and also in the expansion of their business.

What relief can we expect for the Sales and Service Sectors?

Restaurant and Hotel industry is the most complex business as it involves both sales and services which simply means falling into both the taxations, i.e. food and service. We have witnessed these types of businesses going through VAT and service tax separately which is a very complex calculation. The GST implementation will come as a boon as now the tax calculations can be calculated on the total bill.

How about the Logistics and Transportation Business?

The Goods and Services Tax is expected to reduce the many costs related to upholding high stocks as there will be a smooth movement of goods. It will also make sure that the interstate movement will deflate and will take less time as the GST will resolve the check post issues and remove the small border taxes.

What will be the changes in the revenue system?

As of now, the startups go through a lot of things like managing a bundle of taxes at every point. This makes them spend a hell lot of energy, hard work and most importantly time. They have to follow a lot of rules and regulations depending upon a particular state. This is turn makes the whole process of starting a new business a very complicated affair. The Goods and Services Tax will simplify the whole process by combining all the taxes together which also make the payment seamless.

There is a lot of debate happening in the country about the implementation of GST. Some people believe that it might make us lose the fiscal self-sufficiency to the States which will cause permanent revenue loss. However, the Government is ready to pay the reimbursements to the States for the losses they have to go through during the conversion time. Overall, believe it or not, the Goods and Services Tax is a boon for startups, technology and a lot of other sectors. The manufacturing, retail computers, and logistics will have huge savings. But, some other sectors which deal with luxury goods like cars, tobacco industries, etc. might face inflation in taxes falling under the tax slab of 27% to 40%.

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