Tag Archives: Starting a business in India

investment require to start a business

Originating Businesses

Investment required to start a business

“The Entrepreneur always searches for change, responds to it and exploits it as an opportunity!”

Quoted above is not only a saying but a true exhibit of how a man aspiring to establish his own business should retaliate to the dynamic environment we live in. As risk and reward go hand-in-hand, it is crucial for an entrepreneur to estimate the cost involved and income generated for any new business, whether you’re a fast moving start up or still weighing the pros and cons of whether or not to set up a new venture.

Though, the funds needed to ignite and propel a business may vary depending on the nature and type of business, here is a gist that lays down common steps to work it out.

Funds available with you: Initially, you should analyse the fact whether you have sufficient funds to start a business or not. Scrutinizing your income after deducting all your personal expenses will automatically lead you to the figure of funds that you have in hand, accordingly cut down the payments which you think can be avoided and add necessary expenditure which cannot be circumvented. These numbers will help you decide if your business is viable or not, and show you a quicker path to breaking even and long-term profitability.

Fuelling the business: After facing the crisis of financial crunch, take notes on how much is needed to keep the business going for a longer period. This process of incorporating a business is followed by taking account of the application of such funds at various stages:

  • Initial Cost: These tend to be one-off cost items, including:
  1. Lease or purchase of buildings or land
  2. Permits, licenses or other compliance costs
  3. Equipment and/or machinery
  4. Vehicles
  5. Shop fittings and/or office furniture
  6. Branding
  7. A website and domain name
  • Fixed Costs: These are bills and other costs you need to pay on an on-going basis, also known as overheads. These tend to be time-related like monthly phone bills or quarterly rates payments. Common fixed costs include:
  1. Insurance
  2. Utilities, e.g., electricity and internet
  3. Rent or mortgage payments
  4. Wages/ Salaries
  • Variable Costs: These are expenses that vary depending on how much, or how little, your business produces and include:
  1. Raw ingredients
  2. Production materials
  3. Stock orders

In case of insufficient funds, investors and lenders can prove to be of utmost help, but their decision mostly depends on the history of your business. In case you step foot in the business market for the first time, only exceptional idea or skills can induce them to invest their money in your business.

Take expert opinion:  An expert in the field of financing can give you clear insights into how much money is required to start and run the business. Try to find an accountant or advisor who has a good track record with business similar to your own.

Analysing established businesses: An intelligent move to estimate profits and costs is by studying and analysing other businesses in the same industry. This could not prove to be full proof at all times, but still serves the purpose.

Critical evaluation of sources and application of funds of last 12 months is necessary to keep a check on what was planned and how far the business has come. It’s common to operate at a loss when first business is started. One has to make sure that they have enough money in reserve to sustain during this period. A cash flow forecast will help predict whether you’ll need to borrow money, and if you are financially prepared for running the business.

Still uncertain on how to start a business or run already established business? Feel free to consult our experts for this or regarding any other information you are sceptic about AJSH & Co. LLP

To facilitate the process of setting your business, we offer a wide range of services including company registration, accounting and bookkeeping, statutory audits, tax compliances, trademark registration and setting up of SEZ.

Goods and Service Tax

Records you should Maintain under GST

GST Laws in India mandate that all registered persons under GST maintain records and accounts in a specified manner. Every law of Direct and Indirect Tax in our country also mandates that information in a prescribed manner has to be captured and preserved for a certain period of time.  In this article, we look at the list of records to be maintained under GST in detail.

Present Tax System:

  1.  Excise Duty : Under Excise, the general records to be maintained are the RG-1 register (Daily stock account of excisable goods), Form IV register (Register of receipt or issue of raw material), invoice book and job work register.
  2.  Service Tax : Under Service Tax, the suggested records include the bill register, receipt register, debit/credit notes register, CENVAT credit register, etc.
  3.  VAT (Value Added Tax) : Under VAT, the records to be maintained include purchase records, sales records, stock records, VAT account containing details of input and output tax, works contract account, etc

Documents to be Maintained (GST)

  • Details of production or manufacture of goods.
  • Details of inward and outward supply of goods or services.
  • Stock of goods.
  • Input tax credit availed.
  • Output tax payable and paid.
  • Any other particulars as may be prescribed.

If more than one place of business is specified in the registration certificate, accounts relating to each place of business must be kept at the respective places.

Maintaining books and records in electronic form will be ideal and convenient for accurate and timely compliance under GST.

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Goods & Services Tax

Basics that Every One Should Know about GST

How GST Works in India

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Goods-And-Service-Tax-GST

Basics That Everyone Should Know About GST

With the passage of the GST bill in both the houses of Parliament, its implementation from 1 July 2017 is nearly certain.

India currently has a dual system of taxation of goods and services, which is quite different from dual GST. Taxes on goods are described as “VAT” at both Central and State level. It has adopted value added tax principle with input tax credit mechanism for taxation of goods and services, respectively, with limited cross-levy set-off.

GST (Goods and Service Tax)

GST means Goods and Service Tax. It is an indirect tax levied on sale of goods and services. The reformists believe that GST is one of the most awaited law which upon introduced will boost the economic growth in the country. This law if passed by the parliament may come into force from April 2016. As everyone is talking about it now, let’s get into the basics of the proposed law in this article.

Does GST apply to you?

Being an indirect tax, it is applicable to businesses, professionals, freelancers and service providers. It does not apply to salaried individuals.

Is it easy to implement in India?

Not really. Today states have autonomy in collecting state taxes. They have the feeling of losing their rights! They want liquor, fuel to be out of GST tax system. They are also worried about Central government sharing GST revenue with the states. If India becomes one common market, then the states will have to share their powers of taxing with the union government. (Which means states can’t increase the taxes as and when, as much as they want)

What is a “casual taxable person?”

A person who occasionally supplies goods and/or services in a territory where GST is applicable but does not have a fixed place of business in the said state is treated as a casual taxable person. For example, a person who has a place of business in Bangalore gives consulting services in Pune (where he has no place of business), then he would be treated as a casual taxable person in Pune.

What are the differences between the UPA’s GST and the NDA’s GST?
Below are the primary differences:

  • Petroleum sector has been kept out of the ambit of GST
  • Liquor for human consumption is exempt however tobacco and tobacco products will fall under GST.
  • There is a 1% tax on top of the GST for inter-state movement of goods and services.

What will be the short-term impact of GST?

The GST will fuel inflation for the short term. The GST rate starts at 5% and 18% taxation services such as restaurants, movies etc. are bound to increase prices. Another problem with the GST that many pundits feel is not including liquor and petroleum under GST’s ambit. These are major revenue sources for the government and experts feel this is being done due to a few crony capitalists who need some time to funnel away their black money as the GST promises to widen the tax paying population.

Related : How GST Works in India

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What is Subsidiary Company in India

Subsidiary company is any company whose interests are held and controlled or held by another company. Paid up equity share capital and preference share capital of the subsidiary company can be used to determine the holding company, subsidiary company relationship between two companies.

What is a Subsidiary Company?

There’s often a lot of confusion regarding the position of the subsidiary company and what it does. A subsidiary company is a company that is either owned or owned in part by another company. The company that owns the subsidiary is known as a parent company or a holding company. It should be noted that a holding company does slightly differ from a parent company, though.

What is WOS (Wholly Owned Subsidiary)

When one company is 100% owned by another company, it is called Wholly Owned Subsidiary of the company who had made 100% investment in it.

How To Set Up a Subsidiary

To setup one of these companies, you only need a sole director. The requirement for a company secretary was waived some years ago. The only restriction is that the sole director cannot then act as the company secretary. When you register as a sole director, you will enter both your residential address and a service address. Only the service address will appear in the public records.

The key here is that in the various documentation you submit regarding shareholders you will have both an individual director and another company as a shareholder. You are prohibited from having an entire company owned by another company.

Once you submit the documents, you will have a decision within 24 hours from Companies House.

Conclusion

Opening up a subsidiary isn’t a decision that you should take lightly. It isn’t always necessary and it may be better to simply open a different company from scratch. You have to make this decision by yourself. And it may be better to employ a professional agent to help with the opening of your subsidiary.

Know more about how to register company in India

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How GST Works in India

GST is a type of value added tax and a proposed comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by the Indian central and state governments. Further, the Goods and Service Tax (GST) is considered to be one of the biggest reforms in India’s indirect tax structure.

THE NEED FOR GST

Suppose Mr. A sells goods to Mr. B and charges sales tax; then Mr. B re-sells those goods to Mr. C after charging sales tax. While Mr. B was computing his sales tax liability, he also included the sales tax paid on previous purchase, which is how it becomes a tax on tax.

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This was the case with the sales tax few years ago. At that time, VAT was introduced whereby every next stage person gets credit of the tax paid at earlier stage. This means that when Mr. B pays tax of Rs. 11, he deducts Rs. 10 paid earlier.

Similar concept came in Excise Duty and Service Tax also, which is called Cenvat credit scheme. To a huge extent, the problem of cascading effect of taxes is resolved by these measures.However, there are still problems with the system that have not been solved till date.

GST will solve this problem. Let us see how.

  • Sale in one state, resale in the same state

In the example illustrated below, goods are moving from Mumbai to Pune. Since it is a sale within a state, CGST and SGST will be levied. The collection goes to the Central Government and the State Government as pointed out in the diagram. Then the goods are resold from Pune to Nagpur. This is again a sale within a state, so CGST and SGST will be levied. Sale price is increased so tax liability will also increase. In the case of resale, the credit of input CGST and input SGST (Rs. 8) is claimed as shown; and the remaining taxes go to the respective governments.

  •  Sale in one state, resale in another state

In this case, goods are moving from Indore to Bhopal. Since it is a sale within a state, CGST and SGST will be levied. The collection goes to the Central Government and the State Government as pointed out in the diagram. Later the goods are resold from Bhopal to Lucknow (outside the state). Therefore, IGST will be levied. Whole IGST goes to the central government.

  • Sale outside the state, resale in that state

In this case, goods are moving from Delhi to Jaipur. Since it is an interstate sale, IGST will be levied. The collection goes to the Central Government. Later the goods are resold from Jaipur to Jodhpur (within the state). Therefore, CGST and SGST will be levied.

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2017-02-04 12_32_32-Union Budget 2017

Union Budget 2017 highlights

Finance minister Arun Jaitley presented the Union Budget 2017 in Parliament on Wednesday. The biggest highlight in the 2017 budget was the slashing of income tax by half for individual tax payers, ban on cash transactions over Rs. 3 lakhs and reduction in holding period to 2 years for capital gains. In this article, we look at the highlights of the 2017 Budget with respect to an Entrepreneur or Business Owner in India.

Income Tax
Income tax rate has been slashed from 10% to 5% for individuals who earn between Rs.2.5 lakhs to Rs.5 lakhs. Now after rebates, even a person with a Rs.3 lakhs income could enjoy zero tax liability. Since, proprietorship firms are taxed similar to individuals, micro enterprises having income of less than Rs.5 lakh would enjoy the benefits in tax reduction.

Tax Break for Startups
Continuing to build on the 2016 Budget by extending special support for Startups, the Finance Minister has increased the period of profit-linked deductions available to Startups to 3 out of 7 years from the current 3 out of 5 years.

Budget 2016-17 kick-started the process. Several deductions were reduced and sunset dates put for others along with reductions in tax rates for some categories of businesses – new manufacturing companies set up after March 2016 were given the option of being taxed at 25 percent provided they did not claim any exemption and companies with turnover less than Rs 5 crore got a 1 percent reduction. However, some new exemptions were given to start-ups, with certain conditions.

This year, admittedly, Jaitley has not moved forward on withdrawing exemptions even as he reduced corporate tax rates.

But let’s look at who has got this benefit: the small and medium enterprises sector. Income tax for companies with an annual turnover of up to Rs 50 crore has been brought down to 25 percent. A big chunk of this lot was paying an effective tax rate of 30.26 percent, while the large companies (turnover above Rs 500 crore) paid an effective tax rate of 25.9 percent. So Jaitley has in a way done the tax equivalent of social levelling. Large companies have not got any tax relief this year.

Stimulating Bank Credit
To stimulate bank credit to businesses, various measures have been announced as follows in the 2017 Budget:

  • The allowable provision for Non-Performing Asset (NPA) of Banks has been increased from 7.5% to 8.5% to improve the risk appetite of Banks.
  • In line with the ‘Indradhanush’ mission, Rs. 10,000 crores has been allocated in the 2017 Budget for recapitalisation of Banks.
  • Lending target under Pradhan Mantri Mudra Yojana hase been increased to Rs. 2.44 lakh crores. Priority under the scheme will be given to borrowers from certain backgrounds like Dalits, Tribals, Backward Classes.

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Start business in India

Role of the registrar of companies

In India, registering a company is not as easy as it may seem to be. The registrar of companies (ROC) plays a pivotal role in facilitating and promoting a business. It is impossible for a company to conduct business if it has not been issued a certificate from the registrar of companies. No company, under the companies act, 1956, can come into existence without the approval of the ROC. The registrar provides a certificate which acts as a lifelong proof of existence of the company. The ROC office contains data on more than 6 lakh companies that operate in India.

To obtain a certificate, the company has to produce various documents to the ROC. Some of the documents include memorandum of association, articles of association, pre-incorporation agreement for appointment of individuals as directors/managing directors and a declaration by an authorised person such as a high court lawyer or chartered accountant.

After the completion of statutory formalities and verification of documents, the registrar of companies, issues a certificate of incorporation. The ROC also issues a certificate of commencement of business. It is mandatory for all public limited companies to obtain this certificate before starting a business.

During certain times, the ROC can also refuse to register a company on certain grounds. If the documents provided are forged, the ROC can immediately refuse to register the company. No company with an objectionable name can be registered. The ROC can also refuse to register a company with unlawful objectives.

When you start a company, you will constantly need the support of the registrar of companies. In the long run, if you wish to change the name of your company, you will again have to go through the entire process.

According to the Companies Act, 1956, a company has to file all its resolutions with the ROC. The ROC is required to record the resolution. A company will basically have to inform the ROC about all its activities which includes appointment of directors, managing directors, resolutions concerning voluntary winding up etc.

Many people wonder as to why the ROC has to keep such information? The registrar of companies is responsible for what a company does. A company cannot undertake activities if it has not been authorised by the objects clause.

When a person wishes to start a company, he/she must know all the legal formalities. Any person can seek information about a company after paying the ROC the prescribed fee.

In case the ROC is not happy with the given documents, the ROC has the right to ask for additional documents. Lastly, the registrar of companies also has the right to file a petition seeking winding up of a company.

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