Moneycontrol
Jun 30, 2017 07:15 PM IST | Source: Moneycontrol.com

Startups welcome GST despite burden of more compliance

Moneycontrol collated reactions of India's startups from across different sectors on the implementation of GST.

The roll out of Goods and Services Tax (GST) in India is expected to pose initial challenges and hiccups for India's 33 million small and medium businesses regarding compliance and execution.

A clearer picture of its impact across sectors will emerge only after the first few months.

Moneycontrol collated reactions of India's startups from across different sectors on the implementation of GST - the world's largest tax reform ever undertaken.

Here are a few reactions of startup founders and CEOs across sectors:

Increased compliance costs for liquor based restaurants: 

“For the restaurant industry, a single slab will now create a uniform price, and the ease of compliance with mitigation of cascading taxes will result in direct benefit to the consumers in the form of a lower & easier to read bill when they dine out,” said Rahul Singh, founder and CEO, The Beer Café.

Consumers will have to pay a GST of 18 percent to dine at air-conditioned restaurants serving liquor.

“The only dampener is that service of liquor in a restaurant is not under the GST regime and we will have to keep two separate streams of transactions which will increase the cost of compliance for restaurant chains like us who serve liquor,” Singh added.

GST_world

Budget hotel rates could fall, resorts would attract 28% rate: 

Hotels and lodges with tariffs below Rs 1000 per day will be exempted from GST, while rooms priced between Rs 1000-Rs 2,500 will be taxed at 12 percent.

"The lower tax rate for budget hotels sector will ensure that the industry's quality upgrade continues while delivering standardized accommodation to millions. This will also save and create thousands of new jobs which could have been impacted by higher tax rates," says Ritesh Aggarwal, founder and CEO, OYO Rooms. 

However, there could be teething trouble. “The unique thing about GST readiness is that you don't just need to be ready yourself, your ecosystem of customers, suppliers, vendors need to be ready,” said Sidharth Gupta, co-founder, Treebo Hotels.

Gupta stated that the recent notification on the applicability of tax rates on declared tariff and not actual tariff came as a surprise and will require a re-wiring of their systems.

Luxury resorts will attract 28% tax rate. Aditi Balbir, founder and CEO of V Resorts, said, “The implementation (of GST) is poor. There is less clarity on usage, invoices, state-wide issues, etc. and the number of returns that need to be filed."

V Resorts raised USD 4 million from Seedfund and RB International, this month. "The majority of funding (it looks like) will be deployed in hiring a new compliance team," said Balbir.

More transparency in real estate deals:  

“After the successful implementation, we foresee the investors re-entering the sector. We are confident that GST will have a positive impact on the sector in the medium to long run and prices will start increasing moderately after a 3-year price plateau,” said Sunil Mishra, Chief Strategy Officer at PropTiger, Makaan and Housing.com.

GST will replace the combined effect of VAT and Service Tax on under-construction properties.

The declared rate of GST at 12 percent will now become 5-6 percent above the existing taxes, and the end consumer of under-construction properties will end up paying extra in most of the states.

Rahul Nahar, Founder, XRBIA Developers Ltd said that the direct impact of the GST on the industry is less certain at this time. "Effects of any change due to GST will only be felt in 2-3 years’ time frame. While many predict that GST will not increase the overall tax burden on the sector, the exclusion of stamp duty and other relative duties under GST has disappointed many industry analysts."

GST Tax Burden Up

Economy class flight tickets likely to be cheaper: 

Aloke Bajpai, CEO & co-founder, Ixigo: "Post GST, economy flights will become a bit cheaper while a business class ticket would become dearer."

“GST on economy flight bookings is positive for fliers, but it won't be significant enough to get more people to book flights instead of other travel modes. In the case of business class travel, the impact will be slightly more significant, as it might push some business class fliers to opt for economy travel.”
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