Benefits of GST for Small Business and Startups in India

19 Oct,2022

The culture of running small businesses and startups is reigning supreme in India. As per NASSCOM reports, India is in the 3rd position on the international front with more than 4200 startups. Health tech, hyper-local eCommerce, analytics and IoT of the Internet of Things are some of the most preferred choices of young entrepreneurs with startup ideas. Large-scale growth of startups in a country can lead to the betterment of society on the whole and economic development as well. The Indian government is not late to realise this fact and has thus announced the Startup India campaign. The government has also proposed several tax-related and regulatory benefits in this campaign to generate the interest of young individuals.

Amongst these diversified government proposals that encourage startups in India, GST or Goods and Services Tax is the most critical one as far as indirect tax perspectives are concerned. The Indian government has implemented GST with the sole motive of changing the complex tax structure in India. The GST concept goes by the slogan “One Nation One Tax” to make the complaint process more seamless, intuitive and transparent. Here, we will go through GST benefits for startups and small businesses in India.

Benefits of GST for Small Business and Startups in India

GST benefits for startups are innumerable. Let us go through them:

Ease of Operating Several Businesses with Single Registration

Among the most important benefits of GST to business entrepreneurs in India is the ease of operating several businesses with a single registration. In the pre-GST era, businesses had to register time and again, which was quite frustrating. GST implementation has centralised and standardised the process of business registration in India. Under the GST regime, it is no longer necessary for businesses to acquire different VAT registrations. One solitary GST registration would be fine for them to operate across India.

GST Exemption for Small Businesses and Startups

Speaking of the benefits of GST registration, companies with a turnover of less than Rs. 40 lakhs per year do not need to opt for GST registration. This will help the startups grow manifold as they do not need to file any GST returns.

Logistics Expenses Become More Affordable

One of the most crucial benefits of GST regime is making interstate movement more affordable for businesses by replacing state-border taxes at the check posts. This can save businesses's time in goods transportation and resolve several problems at the check borders. As per reports, GST implementation in India has reduced business logistics costs by approximately 20%. Thus, GST is a boon for all those startups that do not have huge capital to use in transportation initially.

One Nation, One Market, One Tax

The benefits of GST in India are not limited to just cost reduction and single registration for multiple businesses. GST implementation has also subsumed several taxes making it easier for startups to calculate their taxable income with less paperwork. Small enterprises and startups can benefit from this new indirect GST tax regime that accompanies fewer compliance expenses. Under GST, the following taxes have been subsumed and made into a single tax:

  • - Service charge

  • - Central taxes

  • - CVD or additional traditions obligation

  • - Central excise duty

  • - Central additional charges

  • - Special additional duty of customs or SAD

  • - CST or central sales tax

  • - VAT or value added tax

  • - Purchase tax

  • - Entry and Octroi tax

  • - Luxury tax

  • - Entertainment taxes

  • - Taxes on betting, wagering and lottery

  • - State additional taxes

The One India, One Market model, is a major opportunity for startups and small businesses to maintain huge logistics and distribution networks because of minimal state-level tax requirements. One common market model across India is the perfect fit for startups and small businesses looking for a larger national footprint without major investment.

Simplified Compliance Procedures under GST

Earlier, businesses like restaurants and computer dealers selling merchandise and offering benefits as a pack had to comply with Service Tax and VAT guidelines. For such businesses, it was critical to identify taxes on supply because different tax rates applied to other products. However, the difference between Goods and Services is wholly refined with GST execution, making compliance procedures under the GST framework simpler. Even invoicing has become easier for startups because of a single tax rate on all goods and services.

Furthermore, the centralised digital system has made it easier for businesses to file returns without the need to address varied tax entities for the registration procedure. It has also waived off the complex w.r.t to manual workflow, making GST return filing super easy for startups.

Regulations of All Unorganised Sectors

In the pre-GST era, industries like textiles and construction did not operate under any tax regulation. However, GST ensures all-inclusive tax implementation across all sectors of the industry. Revamped payment and compliance structures under GST boost the trading potentials of such firms, making them accountable for the misconduct of tax liabilities. 

What is a Startup?

A startup is a company or venture focused on a single service or product the founder looks to introduce in the market. Startups typically do not feature a completely developed business structure and even lack sufficient capital needed to move to the next business stage. Most startups are funded by their founders initially and then operate through funding from friends, family and different venture capitalists. Startups generally use seed capital for research and development plans that help them determine the demand for their goods or services in the market.

These companies are yet to be incorporated or registered and are necessarily formed to bring innovation in specific areas or for the sole profit of the owners. Startups have several business registration options, which include:

  • - LLP Registration

  • - Private Limited Company Registration

  • - Partnership Firm Registration

  • - Sole Proprietorship Registration

  • - One Person Company Registration

Individuals looking to form a startup need to apply for Startup India Certificate, which offers several benefits to such companies.

What is GST?

GST, or Goods and Service Tax, is based on an indirect taxation system. It is a destination-based, multi-stage tax structure that supplanted many indirect taxes across India, like excise duty, service tax, VAT, etc. The introduction of GST is a shift from the old tax structure to a centralised system that offers several benefits to taxpayers, especially startups and small businesses. GST startup is levied on all sources that create value through products and services, and GST for startups applies to all points of sale. Note that all inter-state sales are also chargeable to Central and State GST. 

Is GST Registration Required for Startups in India?

GST registration for startups is applicable in varied cases, which include:

  • - GST for startups in India is mandatory for all companies with pre-GST tax registrations.

  • - GST on startups applies to companies with an annual turnover of Rs. 40 lakhs and more and Rs. 20 lakhs in the North-Eastern states of Uttarakhand, Jammu & Kashmir and Himachal Pradesh.

  • - Startup GST registration is required for startups paying taxes under RCM or Reverse Change Mechanism.

  • - GST registration is important for startups supplying services or products on eCommerce portals or to eCommerce aggregators.

  • - Casual taxable individuals.

  • - TCS/TDS deductors

  • - Non-resident taxable individuals looking to start a business in India should go for GST registration.

  • - Data recovery or access service providers

  • - GST registration also applies to startups that sell goods and services at exhibitions and events that do not require any fixed business location. Such dealers should pay GST based on a 90-day sales estimate.

  • - GST registration is also necessary for input service providers and supplier agents looking to carry forward the advantage of ITC or input tax credit.

Impact of GST on Startups

GST is instrumental in the evolution of startups in India, and It is also a boon for the small and medium-scale industries. Nevertheless, as with every new system, GST also carries some barriers. GST impact on startups is as follows:

  • - According to GST laws, businesses with a yearly turnover of Rs. 20 lakhs and above must go for GST registration. This excludes several startups with a turnover of less than Rs. 20 lakhs. This is a major impact of GST on startups, as the new taxation limits can be a respite to the startups.

  • - GST execution eliminates the requirement for startups to visit the tax offices to file returns and registrations. The simple registration procedure helps startups save a lot of time and resources.

  • - With GST, new businesses can enjoy the advantages of eliminating limitations on inter-state goods movement. This will be majorly valuable for startups supplying goods across India.

  • - Standard tax process for the eCommerce industries by way of GST registration is leading to more eCommerce platforms available for buyers.

  • - Well, manufacturing startups might face the negative impact of GST. With GST in place, manufacturing businesses with a turnover of Rs. 20 lakhs and more need to pay excises. This ultimately has the manufacturing companies paying more as taxes than the earlier turnover limit, which was 1.50 crores for the manufacturing businesses.    


ADCA or Anil D’Souza & Associates is an experienced team of professional and competent GST consultants in Bangalore. If you are a startup in India, initially, it can be a bit tricky to comply with GST laws because of the lack of domain expertise on payrolls. In that case, you must opt for the services of ADCA for efficient GST return filing. So, why should you choose ADCA? 

  • - ADCA is one of the most prestigious GST service providers in Bangalore, with Indian and overseas businesses as its major clients.

  • - You can always depend on the professional and efficient GST services of ADCA.

  • - ADCA is a GST expert with a separate department for this purpose.

  • - Hiring the GST experts at ADCA saves resources and time.

  • - Full-proof compliance with GST rules and greater efficiency

  • - Frees up the attention and time of essential company executives

  • - Cost-Effective services

The experienced and skilled workforce at ADCA prepares and files GST returns regularly. The professionals know their job inside out, and startups can always trust their professionalism and efficiency.


Why register a startup for GST?
Registering a startup for GST offers several benefits, including that your company will be officially recognised as a legitimate business entity. GST registration status will also keep your firm legally updated.

What is the main purpose of GSTIN Number?
GSTIN or Goods and Service Tax Identification Number consists of 15 letters with numbers. The government produces this document after the successful GST registration of a company.

What is the process of GST registration?
GST registration procedures are easy and speedy with the availability of the online portal for this purpose. You need to produce all required documents online and instantly get a GST registration number for your startup.

What are the documents required for GST registration?
The documents needed for GST registration include:

  • - PAN Card of the person or business.

  • - Identity proof

  • - Bank account proof

  • - Address proof

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