Overview of GST and Important Timelines

The Goods and Services Tax (GST) is proposed to be implemented from July 01, 2017, and will effectively change the face of indirect taxation in India. Some of the key benefits expected include a simpler and more transparent tax system that will reduce tax evasion and boost revenues; more competitive manufacturing, especially in the MSME sector, thanks to reduction in tax cascading; and improved GDP due to a wider coverage of goods and services. This attempt towards bringing to life a “One Nation, One Tax” legislation will have far-reaching implications on every citizen, and will impact business finance and personal finances too. This is especially true for SMEs, as they will see a direct impact on their working capital. It is therefore prudent to plan for this crucial event.

Here is all you need to know about the GST rollout.

What is GST

GST is a unified system for indirect taxation, leading to the establishment of a new four-tier indirect tax structure that replaces the existing indirect tax regime. Essentially, four new indirect tax slabs will come into effect, i.e., goods and services will hereafter be taxed according to the slabs of 5%, 12%, 18% or 28%.

Rate of Indirect Tax Goods/ Service
Exempt Goods of mass consumption such as grains and milk
5% Essential items such as edible oil, tea, coffee, insulin, incense sticks, etc. that are exempt from excise duty and are charged at a VAT of 5%. Certain processed foods like sauces, pickles, and preserves as well.
12% Goods currently taxed at 9% to 15% such as processed food and computers
18% Goods currently taxed between 15% and 21% (soaps, smartphones, utility electronic items and, industrial inputs).
28% Luxury goods such as SUVs, select consumables (aerated drinks, tobacco), white goods (AC, fridge) and goods that fall under the current tax bracket of 30% to 31%. Luxury and select consumables will attract an additional cess.

These four structural slabs allow a provision to charge a maximum of 40% GST rate, i.e., a combination of 20% Central GST and 20% state GST.

Services will be taxed at a standard or default tax rate of 18%. Only five luxury services, i.e., five-star hotels, movie tickets, racing and betting (racing and casinos) will fall in the 28% tax bucket. E-commerce companies will be subject to 1% tax collected at source.

The build-up to the GST: A track of timelines

The story began with the Central Government releasing the Revised Model GST Law for public purview on November 26, 2016, and the setting up of the GST Council to discuss and approve the Bill. Thereafter, the Council met on subsequent occasions to discuss and approve the section terms, and targeted a rollout date of April 01, 2017. The latest is a meeting held on 11th June, wherein the tax rates for 66 items have been reduced. A rollout date of July 01, 2017 has now been set. As a result, four legal bills have been presented and passed for different categories:

  • Central GST Bill (CGST): For supply of goods and services by the Central Government within the boundaries of a state.
  • Integrated GST Bill (IGST): For supply of goods and services between different states, carried out by the Central Government.
  • Union Territory GST Bill (UGST): For supply of goods and services in the Union Territories.
  • The Compensation Bill: To govern the provision of compensation for revenue losses brought on by GST implementation, over the next five years from implementation.

All four bills have been passed in the Lok Sabha and subsequently the Rajya Sabha after a series of changes at the Centre. These bills have received approvals from 16 state assemblies with Delhi being the most recent.

Rules and Acts under the GST

The Government is also in the process of driving the GST Council to put together rules and acts for GST implementation. Following are the GST rules passed till date: Composition Rules, Valuation Rules, Transition Rules, Input Tax Credit Rules, Invoice Rules, Payment Rules, Refund Rules, Registration Rules and Return Rules.

Proposed outcomes of the GST for the Government

According to Finance Minister Arun Jaitley, India will evolve to be a more tax-compliant society thanks to the GST. He also clarified that the GST would not lead to inflation, addressing the Opposition’s concerns in the Rajya Sabha.

Here are some of the key benefits of GST:

  • GST will cover the GDP more comprehensively by covering a wider base of goods and services A single indirect tax regime will be instrumental in removing cascading taxation, i.e., tax payment upon tax, or multiple taxation.
  • GST will eliminate any direct interaction between the assessing authority and the tax payer by standardizing and automating processes, and will interlink incentives for compliance, making the tax system more accountable.
  • Overall and on an average, tax slabs may see reductions and the industry may benefit from the greater cash flow that will ensue.

Despite these proposed gains, a closer look at the GST reveals certain drawbacks. Four slabs is a significant number of tax slabs for a unified tax regime, and the tax rates appear to be high. These factors are likely to lead to tax evasions and legal battles.

Proposed outcomes of the GST for tax payers and businesses

For businesses, the implications vary. The “Place of Supply” and the “Time of Supply” are two important considerations that businesses must reflect on.

Goods and service providers will be subject to the tax slab depending on the “Place of Supply”. If the “Place of Supply” is intra-state, then each company entity will need to register separately for the GST in each state of operation, and will be liable to a mix of CGST and the respective State’s SGST. For “Place of Supply” being inter-state, the business will need to register in the state of origin and avail IGST in the remaining states. This makes it imperative for businesses to register correctly to levy the appropriate taxation rate.

Business norms for supplier management will change, with input credit being made available to businesses, but compliance requirements will become more stringent, leading to additional costs for businesses. Businesses must therefore be prepared to plan their cash flows better in light of the GST implementation. This is particularly true with regards to input tax credit, which can have strong implications on working capital for SMEs. This might create a cash crunch in the short term, but will equalize over time.

With the GST rollout fast approaching, it is best to stay informed and be prepared for this sweeping change. We at Capital Float can help you do just that: Visit our GST blog to know more about GST and keep track of latest.

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List Of Requirements For Taxi Financing

The radio taxi business in India has seen a big boom in the last few years. Whether it’s the number of taxis or users, both have seen an upward swing. Analysts foresee an even higher growth in future. Viable basic fare along with lucrative incentives makes radio taxis an ideal choice for customers and drivers alike. However, using a rented car restricts a driver’s earnings considerably, as they work on fixed salaries. This is where Capital Float’s Taxi Finance steps in as an ideal taxi loan choice for drivers who aspire to have a car of their own and earn more.

Our association with some of the largest taxi aggregators in India makes taxi financing a smart choice for an Uber loan or other kind of taxi loans. It provides an opportunity for drivers across the country to purchase cars and fulfill their dream of becoming microentrepreneurs. Securing a taxi loan from a traditional finance institution or bank can often be a tough task. With multiple evaluations and lengthy procedures, getting a taxi loan successfully from these institutions is a time-consuming prospect. Failing to meet any of their highly demanding requirements can lead to loan rejection. In contrast, Capital Float offers an easy process for procuring a taxi loan with fast processing and minimal documentation.

To successfully avail of a taxi or Uber loan, there are some basic requirements borrowers need to fulfill. If their application meets these requirements, they can get taxi loans like Uber loan and Ola finance surprisingly fast. Here is the list of taxi financing requirements, which are needed for a taxi loan.

1. Down payment: The applicant is required to pay a certain sum as down payment for availing taxi loans. The high down payment required by traditional lenders and banks often deters drivers from owning a car of their own. This is where Capital Float’s taxi financing differs from conventional lenders. Capital Float provides a taxi loan for an easily affordable down payment — one of the lowest in the industry.

2. Valid driving license: Borrowers must have a valid driving license to apply for an Uber loan. Not having one will mean their application could be rejected.

3. Valid taxi permit license/badge: The applicant must have a valid taxi permit license or badge to be eligible to apply for taxi finance. The time period for the taxi permit/badge can vary with lenders. At Capital Float, the applicants need to have a valid taxi permit license/badge that is one year old for new drivers with the taxi aggregators.

4. KYC documents:  To be eligible for taxi financing, applicants need to submit KYC (Know Your Customer) documents at the time of application. At Capital Float, we request minimum documentation and ensure a hassle-free processing of the taxi or Uber loan. The application process for taxi loan at Capital Float happens online. This makes the process more convenient where the applicant can upload the documents directly with minimal paperwork.

Though all of the above are mandatory requirements for getting any kind of taxi loan including Uber loan and Ola finance, there are certain other things the applicant should keep in mind while applying for an Uber loan. This makes it easier for drivers or applicants to pick a lender that suits them the most.

Flexibility in repayment: The repayment of taxi loans can sometimes stretch the borrower beyond capacity with equated monthly payments or EMIs. If drivers have a more flexible option for repayment, it can bring down the pressure of EMIs to a large extent. Capital Float provides a weekly repayment option for taxi loans. This reduces the size of the installments and ensures payments are not carried over/missed. This can be a big boon in a business where daily earnings are dependent on factors beyond the control of the borrower.

Processing fee: Besides having time-consuming and complex processes, traditional banking institutions levy a processing fee. This can vary depending upon the lender and generally tends to be higher in traditional banking institutions. At Capital Float, however, we charge only a minimal amount as processing fee in a bid to keep things transparent and enable our customers.

Ease of application: It’s the age of digitization and online is the preferred channel for an taxi loan application. Capital Float’s taxi loan applications can be made online, require minimal documentation for processing and are disbursed within 3 days.

Hidden charges: Pre-closure charges which are levied by banks and conventional lenders are an additional burden for borrowers. These charges prevent borrowers from closing the loan early even if they can. Capital Float levies no pre-closure charge and borrowers are free to close the taxi loan before the completion of the loan tenure.

Collateral:  Typically, banks tend to sanction a taxi loan if the applicant has substantial collateral, which can be used to recover a bad debt. Capital Float however disburses taxi loans without requesting for collateral, thus improving the chances of many applicants to secure an Uber loan or other taxi financing.

Processing time: Applicants who wish to get a car of their own at the earliest are discouraged by the long time taken to process traditional loans. Due to late loan disbursements, they end up losing valuable business. Capital Float’s taxi financing process is prompt, and funds are credited within just 3 days to enable drivers to start earning at the earliest.

Capital Float’s taxi financing with minimal requirements along with prompt processing makes it an ideal choice for aspiring microentrepreneurs who hope to succeed in radio taxi business.

Oct 24, 2018

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Your Concise Guide to Choosing a Business Bank Account for Working Capital

Having a dedicated business bank account is important for business owners to effectively manage and utilise their working capital. With a simple segregation between personal and professional funds, the day-to-day transactions will be easier to track and document. It is also essential for compliance in IT returns filing and will help you to identify the correct deductions for your tax savings.

In India, small and medium enterprises (SMEs) generally use current accounts to manage their funds and to get a working capital loan. While no interest is received from these accounts, lately some banks in the private sector have started offering interest to attract more buyers for opening accounts with them. As a part of their services, the banks also provide working capital finance to their eligible customers with current accounts. However, these grants are sanctioned upon the pledging of an asset as collateral. Industrial, commercial or residential property or liquid securities have to be pledged while borrowing funds for business from a public or private sector bank.

With the availability of working capital financing solutions from digitally operating NBFCs – known as FinTech (technology) companies ¬– entrepreneurs can now have their dedicated business bank account and procure loans without pledging any collateral. These online platforms provide financial the benefits of less stringent terms and flexible repayments.

The question then is – how to choose the right bank account for business transactions? Most banks have now customised their current accounts into different sub-categories, and an enterprise can choose one based on its annual turnover and particular needs. The key expectations from such an account are:

Salary solutions for employees: You need to pay your employees on time every month, and may have to remit their remuneration through dedicated salary accounts or crossed cheques. The business bank account must make the execution of these processes simpler.

Digital banking services: In an era where all personal banking transactions can be done online, current accounts must also come with a host of online banking services. Your account must give you the flexibility of transferring funds anytime, anywhere, and of making regular payments on working capital demand loan that you may have procured from another financial institution. In addition to net banking, services such as phone banking, mobile banking and quick reverts on SMS-based queries are looked forward to as well. Mobile instant alerts on transactions must be provided by banks in the digital age.

Cheques payable at par: Your business bank account should offer the provision of personalised cheques payable at par across India. This conventional facility is good for business owners who prefer to use cheques over online banking for making payments to their employees, vendors, suppliers and to the companies that issued working capital finance to them.

Competitive foreign exchange rates: If your business operations involve buying from or selling to other countries, you will need seamless foreign exchange transactions. Choose your current account from a bank that offers competitive rates on foreign exchange rates routed through them.

Zero balance account: No business wishes to reach a point where they have zero balance in their bank account. Nevertheless, there can be tough times in the market and you may experience some strain on your finances. For emergencies, your business current account should allow you to reach zero balance even if it is for a temporary period. There should be no ‘penalty charges’ on such accounts. You can always update the balance with relentless focus and consistent efforts while working on your business objectives.

Where a zero balance account is not possible, the minimum monthly average balance (MAB) must be made affordable for SMEs. Alternatively, the penalty for non-maintenance of minimum balance must not be very high. Do not hesitate to compare business accounts of different banks on this basis. Your working capital finance provider may also be able to guide you here.

Interest rate: We had mentioned earlier that current accounts do not usually involve interest earnings. This had been the norm in the banking industry for decades. However, with an increasing competition between public and private sector banks, things have changed. All financial institutions are trying to enhance their brand image in the industry by offering products that are more attractive to prospective customers. In this race, they have started delivering interest on idle money in business accounts while also giving the flexibility of accessing the funds anytime. With interest earnings on your account, you can also speed up the payments on your working capital loan procured from any source.

Businesses do have good reasons for applying for a separate banking account, and it also proves their creditworthiness to sources of working capital loan in India. Non-banking financial companies (NBFCs) and FinTech lenders can directly disburse funds into a current account.

The documents needed to open such accounts vary from bank to bank and depend on the type of business. Those investing in their start-ups are often asked to submit copies of their latest IT returns, PAN Card and ID and address proofs such as Aadhar Card or Passport copy. Partnerships, Limited Companies, Trusts, Associations and other corporations that involve more people and hire employees need extra documentation, which among other things must also include the registration deed for the business.

Further, check the fee and applicable charges on these business accounts. There may be charges for remittance facility from other banks, for the maintenance of debit cards and duplicate or ad hoc account statements.

As a FinTech lender, Capital Float disburses loans into your accounts in a duration as short as 3 days, helping you to keep going further for the consistent success of your venture. We have an array of loan products to help you work on the seamless growth of a project that you have enthusiastically nurtured.

Oct 24, 2018

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No Such Thing as Too Many Cooks

As an organization, we are out to ‘Break Limits’. We have arrived at the august club of ‘fastest growing financial services organizations’ in the shortest possible time, but that hasn’t been down to all work and no play. We have taken a ‘human first’ approach —we have a fun, personal side that we often tap into to unleash energies that are waiting to find expression.

At heart, an organisation is usually a reflection of its employees. People from different parts of the country, from different verticals and industries, come on board to join forces as a team, out to achieve common goals. What’s the secret sauce that binds them in this mission?

Capital Float Cookout

 

Capital Cookout - Chennai

India is a myriad mix of colours, culture, terrain, weather and of course food! It is not surprising that Indians are by nature great foodies and passionate food critics. Quality, taste and creativity are found in abundance, and bonding over food is in our DNA. Perhaps this was the reason why our people resources team decided to spice up life by organising a free-for-all cookout. Going by the results, they were well on target!

Held in Delhi and Chennai, the Capital Float Cookout was a food fiesta sprinkled with healthy doses of competition, cooperation, fun and, of course, food. Our Delhi office saw a “fireless cooking competition”, which involved 15 minutes of introduction, 45 minutes of cooking and 15 minutes of evaluation. It takes a lot of creativity and courage to cook up dishes that haven’t seen “fire”. The session in Chennai was colourful with a lot of variety. The Chennai office fielded five teams of seven members each and cooked up a storm of three to four dishes per team. The top three earned compliments, culinary fans and Amazon gift vouchers.

In all of this, a culture was created and seeded—a culture of camaraderie, fun, togetherness, friendship and cooperation.

Spirit of Fun and Togetherness

Capital Cookout - Delhi

 

Winners were not the only ones to stand out in these cookouts. What stood out was the fiercely competitive zest of the people trying to help their own competitors. What stood out was the happy backslapping among the teams and the sharing of food that was made for what was supposedly a “competition”.

Language barriers, functions, departments and designations all melted in the cooking pot, creating a cohesive team. And when a bunch of individuals come together as a team, there’s seldom any competition within. In the process, the team’s human side stands out—a sense of humour here; a deft salad chef there; an unexpected leader, musician and dancer. Interesting stories about each person emerge and amalgamate to create our unique culture – a culture of togetherness.

Moving forward, we will be organising the ‘cookout’ in various other office locations, beginning with Mumbai in a couple of weeks. This activity is surely going to stay, appeasing the palates of our team members and stirring a broth of excitement across the organization.

Oct 24, 2018