GST advantages for startups and small businesses

GST advantages for Startups and small businesses are discussed here before, we start about the topic, we just have make you brief as about GST and what things you should know and then we will be coming with the main agenda of this article.

Goods and Services (GST) is a destination which is based on value added tax, which is being collected at all the focuses on the production network and being done while taking the inputs into the consideration.

At the end, it is the customer which bears GST as the last individual in the production network.

The presentation of GST made in India has been relied on the response of the real arrangement of aberrant assessment structure at both center and state levels- supplanting the various layers of the tax assessment which is existing in India.

Just as a startup having an innovative idea is needed to be executed well and GST plays the same role which needs to be implemented in a proper manner so as to achieve the intended impact and moreover, GST is rather an rebooted version of old fashioned method of taxation and it is a facilitative and efficient tax regime and is providing the boost to the newly showing up startups and small businesses.

In this article, we will be talking about GST advantages which can really help out startups and small businesses.

As we have known that after the biggest tax reform took place in India in the year 2017, the ride has been surprising and looked like a rollercoaster.

While there were some industries which were against it, while some of them were welcoming the concept of GST and due to this, the transformation that took place in this country new taxation system and this now can prove as an advantage to the startups and small businesses.

Change of such kinds of nature are never easy and so the Indian Government is trying its best for making the GST implementation at ease and so while we are at the initial stage and there are several rules and procedures which are still to have more clarification and modification and then one could only believe that the Goods and Services tax would also support other major government initiatives like the startup India and Digital India and hence the startups will be finding more and more chances to exploit and can also adapt to the changes in their business models as being needed under the GST framework.

GST would be ensuring that there is a level with uniform playing where the startups and business models are working on their goals and together with large peers and thus it can be said that GST will certainly provide an impetus to the new bloomed startups and small businesses in country.

On July 1,2017, the GST was being rolled out and so the motto of “one country and one tax” is finally becoming a reality.

This new tax has been shifting the focus from the tax on production to a tax on consumption and thereby, entail to make a single national market, as if there was some expert, he would have stated as a single commercial union.

This GST has been billed as one of the biggest tax reform since independence and seeks to have the uniform taxation for various kinds of goods and services across the country and this has been uniting the country as a single market by folding states and central levies to itself.

The GST will not be discriminating between goods and services and will, do the taxation of both of them at a flat rate and so this will remove the multiplicity of taxes and hassles of computations and small businesses have to now make sure that their processes, including the accounting and data management are being organized so as to able to file the compliance report three times a month.

When you are doing a startup or have a small business, then during the GST filing, there will be only two buckets which has to be created to get the input tax credit– one for state-GST and another for Central-GST and so if companies are going to sell in, they also have to make the buckets for taking the input tax credit in VAT paid by them.

As the GST is being rolled out, the lack of clarity is one unsettling factor as it can hamper the business decisions and so the working capital needs might be increased and can be settles down as the process is being established and since the Small and medium businesses do have their online presence, by getting them all smooth onboard the digital bandwagon, and then expected to learn the digitally filed GST filings and do it smoothly is a big headache.

But there is no need to worry, as the GST council has extended the deadlines for doing the GST tax return for the first two months and so allows a simple format for the same, which can cite the lack of the preparedness on the part of the ERP department and other businesses and this relaxation is meant for the first two months while the assess can file the returns for the July month by August 20 date and for August to be filed by September 20 date.

However, they have to file the return with invoice-wise details for both August and September in the same month of September.

And to say, this GST regime change is very huge and it won’t be smooth for everyone and hence in the startup and small business ecosystem, they should be made prepared for the jumps and breaks for the next few months to adapt to the concept of GST as it rolls out in country slowly and take each step very carefully, to make your business journey smooth.

Now, we will be listing as to what are the advantages of the GST for startups and small businesses:

Cascading of taxes has been eliminated

Since we know that GST was being made to bring all the indirect taxes under a single roof, the earlier hassle of so many taxes were being eliminated and so with the coming of GST, startups and small businesses can have great advantage in more direct savings for them.

In the below picture, you can see all major taxes which have been consolidated into two-parent tax heads.

In above types of taxes which are central taxes and state taxes which includes all the type of taxes which can be paid easily and no need to pay for so many taxes, only GST suites for the startups and small businesses.

Higher registration threshold

Before GST, any business with the turnover of more than 5 lakhs was being made liable to pay value added tax and now with coming of GST, this has levelled the playing the field by exempting the small traders and service providers from paying of the taxes to a threshold up to 20 lakhs

Regulation of unorganized sectors

There are many industries like textiles and construction, which had been unregulated over the years and with coming of GST, there was an introduction of relevant compliance and payment structures along with the financial provisions that boost trade, accountability and regulation.

For instance, input credit can only be accepted when the supplier has accepted the amount.

Implementation of the composite scheme which is a primary part of GST which was being introduced with the preview of reducing taxes and the associated compliance and due to this, small business owners are liable to pay a certain amount of percentage of tax of their turnover.

Online Compliance processes

This is another benefit of GST affecting small businesses and startups as they are very easy for the small business owner to file their returns with the coming of the online portal. With coming of GST, there has been an development of centralized digital system which means that they can no longer needed to register with separate tax entities and can undergo the hassle by the manual workflows

With the coming of GST in India, the method for registration for GST will have to be standardized and centralized and being similar to the registration being done under service tax. Under this routine, small businesses and startups will not acquire VAT registrations – as a solitary GST registration process will be a good option to adapt.

GST will improve the ease of doing Business and will help startups and small businesses as like there are businesses rising up like restaurants or computer sales and service where they have to sell goods and services and it has to be complied with both VAT and Service Tax registrations and so this creates a complexity for the business as they have to calculate taxes for the transactions based on different items and due to this, GST came into place and now the distinction between goods.

With the GST coming up, the floor –level realities are very different than it  was before and this offers an extra opportunities to the new business model for improving business avenues and there are other advantages as well :

  1. Now transportation  of goods take less time than earlier
  2. Reduction and storage and transportation cost
  3. Supply chain became the best and sole function for the businesses coming up
  4. Warehousing hubs were being developed so that they can be organized and go towards the larger client geographies.

Any kind of individual or entity who wants to make their own business in India they should apply for VAT registration and they would have to apply from state sale department and so there were many difficulties in obtaining and maintaining compliance with VAT registrations and with the implementation of GST in India, the procedure for GST registration has become more centralized and also more standardized and it will hope to remain similar to service tax registration.

Under this regime, the small businesses will no longer have to obtain multiple VAT regsitrations and will remain as a single GST registration in India and thus, the procedure for obtaining GST registration will also be standardized and thus, by improving the ease of doing small businesses and startups in India.

The most significant area where GST has been contributing immensely is towards the employment with providing more and more opportunities to the startups and small businesses and can bring some challenges as due to the introduction to this new law and brought up some new concepts which are supply and the location of the supplier and that could throw up various interpretations.

The rollout of GST was a massive task which was being achieved over a decade and so the existence of multiple rates is now a challenge. With GST framework having tax-slabs of 5,12,18 and 28 percent, gold was being taxed at 3 percent and there is no cess going on goods and luxury goods which can result in further deviations in effective rate of taxation under GST regime.

With coming of GST, there were many taxes which were being subsumed and we will brief you about it :

Central Taxes Subsumed under GST

  1. Central Excise duty (counting extra extract obligations)
  2. Service charge
  3. Additional traditions obligations
  4. Special additional duty of customs
  5. Central additional charges and cesses

State taxes subsumed under GST

  1. Value added tax
  2. Central sales tax
  3. Orchoi and Entry Tax
  4. Purchase Tax
  5. Luxury Tax
  6. Taxes on lottery, wagering and betting
  7. State cesses and additional taxes
  8. Entertainment Taxes

Now, another advantage which I would like to enlighten is that if any startup or any small business get a turnover of Rs.40 lakhs, they don’t need to be registered under GST and as accordingly, many of the startups and small business having an annual turnover of RS.5Lakh – Rs.40 Lakhs need not to be file GST returns and this gives them the chance to grow.

Now, that we have discussed about the GST advantages for Startups and small businesses, let us see some more details about GST which is important to know.

If we see in the outset, then GST aims to simplify the tax regime by reducing the multiplicity of taxes and this will not only bring compliance cost down but also it will make the taxation fixed and permanent with crystal clear made visible to the digital tax processes and so due to this, startups lack the resources to hire tax experts or need a dedicated team for handling compliance and hence the DIY model make it easy for the startups to do the taxpayer registration, return submission, tax payments and also claim refunds online.  This will be more advantageous for all sorts of startups with irrespective of sectors.

As we know that doing business in India is not easy and so the Entrepreneurs have to undergo many steps in order to start doing business and this includes company registration, service tax registration and VAT registration and they intend to operate among others and so business expansion will be more seamless an smooth as the companies get only one license for their company and then do business in many states and this will have the same rate for each state and this will bring down the logistic cost for many businesses.


In this article, we have showed you as what are the GST as the advantage for startups and small businesses and with this article, if there is someone who is starting an startup or a small business, can see the advantages we have listed here above and these points that we have discussed will help you to start your business or your company and you may face some kind of challenges in the beginning but as you go and progress with the goal set in your mind and follow the rules and regulations of GST and pay your taxes, your business will grow smooth and might be able to compete with other in the same race.

With the evolution of GST coming up in India, a lot has changed and it will continue to change for many big organizations and small organizations but the thing is that at the end of the day, you will feel relaxed and will be able to take the baby steps in your new business and have an excellent growth by just adopting to the concepts of GST and moving ahead as you reach over the turnover between 5-40 lakhs, you don’t need to file your GST return as not needed for such a turnover and it will allow you to progress even more.

So, if you want your business to be kick-started in this year, then go ahead with GST concept and be compliant with it and you will be able to run your company very smooth and we are concluding this article so that you can read this and go ahead to run your company. Good Luck.

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