While there is a general buzz of approval over the passing of the GST Bill by the Upper House of the Indian Parliament, there are some murmurs of disquiet as well. The startup community has unanimously welcomed the decision of the legislators but there are certain provisions which have given cause to worry.

Calling the amendment an extremely progressive piece of reform, Indian Angel Network and NASSCOM Co-Founder raised a few concerns saying Saurabh Srivastava, “Some of the provisions will impact the ease of doing business. The tax at source provision for ecommerce will prove to be discriminatory in comparison to retail and if we do not fix this, ecommerce will become unviable. For services, provision for valuation might create transfer price problem and the service tax which is currently 15% will increase to 18-22% under GST. Also, pan-India service providers will have to seek registration in 37 jurisdictions – separately for states, UTs and central territory.”

“The legislation will also make billing and invoicing requirements more complex and although there is a reverse charge on GST for imported services wherein you can get refunds but it will lock in crucial working capital. This can adversely impact export competitiveness,” he adds.

Terming them lacunae rather than challenges, Srivastava expresses confidence in the government’s determination to provide ease of business and hope in cleaning up these provisions before the actual implementation.

Echoing Srivastava’s concerns, Droom, Founder and CEO, Sandeep Aggarwal hoped that the government will shield the e-commerce companies from the heavy implementation costs.

“GST is not just tax simplified but a tax regime that no longer ignores the existence of a digital economy and the 21st century commerce. At present, there is a maze of indirect taxes. GST will help eliminate the ambiguity that currently exists and will help to build a unified market across India. Hope the government does not pass the burden of implementing GST, operating costs and technology build out to e-commerce companies who to begin with have scanty profit margin of not making loses.”

With most of the startups failing to survive the highly competitive startup ecosystem and only a handful registering profits, there is a need to have a closer look at the fine print of the GST Bill.

Source: The Economic Times

Image Courtesy: The Economic Times