When it comes to the know-how of licences needed by start-ups, the process in India is not much friendly and hence a lot of young entrepreneurs often tend to function in a clumsy manner. This leads to a situation where the start-ups operate without these licenses.
But there are many new business start-ups which are always willing to operate in a legit manner with all the licences. So here are the licences which are mandatory for start-ups:
This is a must for all businesses, irrespective of whether it is registered in the name of a proprietor or entity. The Permanent Account Number is to be for all sorts of payments. PAN is needed while starting a bank account or during the, payment of any sort or service tax.
All business houses those pay salary, commission or interest to its employees are required to have a TAN. TAN is quoted on tax deducted at source. TAN, which stands for Tax Deduction and Collection Account Number, is a 10-digit alphanumeric code. Another point to be noted here is that TAN gets approved only when the company has a PAN to its name.
It is an indirect tax government imposes on services provided by a company. This system of taxing came into being under the Finance Act, 1994. Any organisation that provides taxable service of more than 9 lakhs has to abide by this act. However, the company can only collect service tax from the customers once its revenue has crossed a turnover of 10 lakhs. The service provider pays the tax to the government at the rate of 14.5 percent. Thus service providing companies need to file return twice a year. After the introduction of the GST, which is expected to do away with a lot of indirect taxing measures, it might not be a practice. But that is something which is futuristic, as of now the service providing companies in India have to collect and deposit service taxes.
VAT & CST
Value Added Tax is commonly referred to as Sales Tax. Much like the service tax, this too is an indirect way of tax collection; it is levied at various stages of production of services and goods. The VAT is applied on imported goods as well but it does not exceed the limit that is applied on the local products. To understand it simply at every stage where some sort of value is added to the product, there is an addition of tax. It is the consumer who has to bear it all at the final stage. This form of taxation requires a lot of transparency. Any company having revenue of more than 5 lakhs is liable to pay VAT and register for it.
It is far easier to understand Central Sales Tax (CST). This is levied on goods when they cross one state and enter another. It is not much different from taxes levied by government across the globe. It helps generate a large chunk of tax revenue for the government. Even this tax is computed on imported goods and those which are manufactured within the confines of the Indian state. VAT and CST are collected and submitted on a monthly basis and return too is filed monthly.
Within 30 days of employing an individual, every company must endeavor to obtain a registration for collection professional tax. The owner of the business must deduct professional tax from the income of the employee as specified by the state the company operates in. This tax goes to the state authorities or the municipal corporation. In this case also the return must be filed every month.
Shops & Establishments Act
Having discussed in detail about the taxation and other licenses a start-up requires, it is time now to delve into another important aspect which is the right of the employees in the newly formed company. The act sees for the conditions of work, lists and rights of the employees among other things. It also outlines the obligation for the employers. It is a central act and applies on every shop, company, business houses etc across the country. A start-up is a register for this within 30 days of it commemoration whether or not it has hired employees by then.