The growth potential of India has made it a home to millions of startups and MSMEs. In the past decade, the industry base of tech startups was recently joined by more than 3,000 new companies. The start-up landscape is becoming wide every day strengthening the funding as well as the economy of the nation. Also, this achievement has brought India into the list of the fastest growing economy in the world. Now, most of you might ponder this progress as the perfect case scenario but the truth differs.
The value of a startup
As India is still developing, the startups are considered nascent but frothy. Even the government has shown no mercy as the online businesses aren’t exempted from the regime, whereas the sole proprietors are relieved. The fact is being overlooked that these online micro-businesses provide jobs either directly or indirectly. And there is an excellent opportunity for the online industry to grow as there are 400 million internet users in India. But with the suppression that these businesses experience due to GST makes their survival in the market difficult.
What needs to be improved?
There is a grey space between making the online businesses in India empowered and treating them like a junk. The 90% of the small businesses in India are formed by micro businesses. Although, the online businesses are relieved with the fact that the GST regulations would make the Indian market unified. This had prevented the state powers to levy that tax of their will on the online businesses trying to make something big from the scratch. Here are some of the main problems that the online industry faces today:
- The turnover limit– Currently, if a business has a turnover more than INR 20 lacs, then it has to register under the regime and file returns. And the companies doing the business less than INR 20 lacs are exempted from the regime but the case with the online ventures is different. No matter how many turnovers the online businesses have, they are bound to comply with the regime that makes the performance fickle.
- Asset-light business model– Now this might be the case with you as well if you own an online business. No business can reach a level of comfort within a blink of an eye. It takes years of hard work and dedication. But the condition of the online businesses in India is even worse. Many of the online businesses work on an asset-light model as they make no revenue for years. And thus, complying with India GST regulations and getting in the hassle of return filing becomes a real trouble for these businesses.
- Lack of talent– The lack of the availability of the employees also becomes a major concern for the online businesses. Due to the lack of revenues and increased pressure of the taxation, hiring suitable candidate turns out to be beyond their wildest dreams. Although the online business is responsible for 30% of the overall jobs of the nation, the nascent ones struggle to their core.
Relieving factors
If the growing online businesses in India are to be saved from suffering more, the government would have to implement following measures:
- Exemption- If the online businesses could be exempted from the regime, then it would give multiple advantageous edges to the entire industry. It is very unfair to those who are involved in the online business. On the one hand, they have to maintain a constant pace in the market and on the other hand they also have to make enough revenue to make the company survive. However, exempting these businesses from the regime would empower them in many ways and also increase their focus on making the market more competitive and strong.
2. Returns on the annual basis- Sometimes, there could be no exception in the way the things are under some circumstances. Similarly, in the case of the Goods and Services Tax, the government might not agree to exempt the online businesses from the effect of the regime reason being the enormous growth of the industry. But even if the government makes the businesses follow the regime, it at least provides them the breather to file the returns on an annual basis. Filing a return under GST is a hectic task and consumes most of the time of the businesses, even the well-settled ones. So, being provided the benefit to filing a return once in a year, an online business can most of the time be relieved from the burden of the taxation.
Conclusion
Keeping the start-up industry under the effect of the Goods and Services Tax Act might not prove to be the best idea. Although, the smart approach would be to first let the industry evolve on its own. The moment the industry gets rigid and sustains well in the market, then apply GST on it would sound sane as well as result-oriented.
