What Are The Impacts Of GST On Startups Of India

March 22, 2018

What Are The Impacts Of GST On Startups Of India

GST Law in India came with a bang!! One nation One tax regime, Goods and service tax or GST will be one tax to subsume all taxes. One of the biggest tax reforms post independence in 1947, the Goods and Services Tax  has brought unprecedented transformation of the Indian economy.

There is a lot of conjecture around whether our markets are strong enough to sustain the impact of a radical change of this magnitude especially; when the country is reeling from the after effects of demonetization. There’s a lot of talk on how GST impact startups of India? With lot of speculations of ifs and whys and the rumors of GST implications on startups India and Indian economy lets read it out how in real GST will impact startups of India.

Brief On What GST Is All About 

It is one unified indirect tax on the supply of goods and services, right from the manufacturer to the consumer.

It will consolidate a wide gamut of indirect taxes like VAT, Service Tax, Central Excise, Octroi or Entry Tax into one unified tax. Furthermore; this Goods and Service tax will be levied simultaneously by the State and Centre across the value chain.



The Indian startup community stands to gain considerably post the implementation of this new tax regime. And these gains will not just be limited to the manufacturing segment. Poised at the precipice of disruptive growth and development, let us understand how these young Indian startup ventures are going to be benefited from GST.

Doing Business Is Easy Now

The implementation of GST law is going to eradicate VAT, Sales Tax etc. Until now, every new business needed to knock on the multiple doors of the Sales Tax department for their VAT registration.

Businesses operating in multiple states have to persevere their way through a host of different procedures, guidelines and fee structures. However; with the uniformity that the consolidated GST is set to bring in the economy.  Aspiring entrepreneurs will find it easier to not only start their business but; also grow across different cities and states.

Impacts Of GST On Startups India

1.Higher Threshold Registration Process

As per the present VAT structure, any business with a turnover of more than Rs 5 lakh has to get VAT registration and pay VAT as per different in different states. Hence; now under GST this threshold has increase to Rs. 20 lakhs therefore; it is exempting many small businesses including startups.

GST also has a scheme of lower taxes for small businesses with turnover between 20 to 1 crore though its optional. It is called the composition scheme. This will bring respite from tax burdens to newly established businesses.

2.Startups Of India Enjoys Tax Credit On Purchases

A lot of startups are into service industry and they pay service tax. Under the regime they can set off the VAT paid on the purchases for e.g. office supplies with the service tax on their sales which they cannot under current regime. Hence; Goods and Service tax law can prove to be a blessing to the startup industry India who are mainly into providing services. It will result in reduction of costs hence; increasing working capital to the already cash-strained startups.

3.Online simpler procedure under GST

The entire GST registration process is super easy. The process starts from registration to filing returns and payment of tax can be done online. Startups no more have to run around to tax offices to get various registrations under Excise, VAT, Service tax. Also; you can handover your GST registration documents to a professional firm who takes care of your entire GST process.

4.Easy Taxation 

Startups often work on low budget and cannot spend on resources to look after the various tax compliance under Excise, VAT, CST, Service Tax etc. This new tax regime will sub-sum all of this thus; reducing the time spent for tax compliance. Also, startups dealing with both goods and services will find it much easier to file and pay one GST payment instead of two taxes i.e. VAT and service tax.

5.For Those In E-commerce And Online Startup Businesses

Many startups are technologically innovative meaning they have a huge presence online. Many startups provide goods and services through the internet. GST rates on services is applicable all over India so there is no complication for inter-state movement of goods. Currently, states have different VAT laws. For example, online websites Snapdeal, Amazon delivering to UttarPradesh, have to file a VAT declaration and the registration number of the delivery truck. 

Bottom Line

However, once this new reform gets implemented, majority of the present challenges of this industry will be a story. India will become one single market where goods can move freely and there will much lesser compliance to deal with for startups. As of now; businesses especially; for startups of India are finding bit complex. But; like said where there is a will there’s a way connecting with an expert financial management firm that undertakes all Good and Services Tax work.

Get Your GST Problem Straightened Out!! 


March 22, 2018

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