Goods & Services Tax: How It Has Affected The Startups In India

GST (Goods & Service Tax) has undoubtedly been one of the biggest economic reforms in the history of India. The tax provision made enough hype both pre and post implementation. While taxes are an involuntary fee that government levies on individuals and organization, GST is much more justified and transparent. It has affected the Indian economy in many ways, especially the startup community.

Startups in India & GST:

No doubt India is a hub of talents. The growth of start-up business in India has shown exponential potential in recent past and there are many names that boast of their success. There are hundreds of entrepreneurs looking ahead for tap the opportunities and make their fortune. However, starting a new company is no cake walk. You have to start from the scratch taking care of the land of the law, legal compliance, logistics and then taxes. But, with GST in place, it is now easy for startups to deal with their logistic & taxation easier and swifter.

Here is how GST has affected startups:


• Easy registration:
After the implementation of GST, it is easy to register for your tax profile. While VAT registration (Which was a must for businesses) had a different fee in different states, for GST registration, one has to pay a common fee. All the startups can now easily register their firms and have to pay the same amount irrespective of their geographical presence. Moreover, every startup will get similar license unlike before when it was different for different states.

• Simple to track tax:
Unlike before when a new startup has to devote half of their productive time in dealing with ‘n’ number of taxes, there is one common tax to be paid. Moreover, earlier there were different rules for different taxes in different states which were enough to create a mess. But now, the uniformity of GST tax rules makes it less cumbersome for newbies. Now, startups can direct their time, efforts and mind towards productive things.

• Improved Logistics:
GGST has affected the logistics sector of the startups significantly. The uneven taxation system on logistics was always a troublemaker for startups but with GST no such problem exists. Inter-state transit is cheaper and the rules are easy to understand and implement. Different GST software makes it easy for startups to keep track of their GST requirements.

With all good things there come some challenges, here are the challenges of GST that startups are facing:

• Previously any business deal in manufacturing with less than 1.5 crore turnover was duty-free, however, after GST the limit has been lowered and fixed at 25 lakhs. This has made any small businesses pay extra duty for their startup.

• The Goods & Service tax makes it a mandate for the e-commerce start-ups to file the returns on the monthly and quarterly basis. This demands a closer follow-up of compliance and thus increase complication for start-ups.

• GST differentiate between operators and aggregators in the e-commerce industry which is otherwise with in reality. The government imposes a tax on operators but let aggregators be tax-free.

This is how Goods & Services Tax has affected the startup industry in India. More good & lesser bad, GST undoubtedly becomes a boon for the Indian economy. However, still too young to predict, GST can be reviewed the best once it lives to the age of a year or so.

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