GST GST Advisory

GST Effect on Startup Eco-System in India

GST Effect on Startup

The Goods and Services Tax is implemented from July 1st, 2017 and will affect the prices of the good and services in the market. With all the new laws that GST Registration in India is set for each industry, it is important to read and know the effects it will have on your business and the goods and services that you buy and use. This law was enacted by the government to streamline the central and the state government taxes, and for the consumer to be able to pay one collective tax. This article is explaining about GST Effect on Startup Eco-System in India.

In this taxation system, some industries are benefiting, while the others are going to pay more tax than they paid before the GST was implemented. It would legalize a lot of activities that take place in the country and would also install integrity and seriousness amongst the vendors and distributors. The consumers could find goods and services less expensive than before and every kind of item would fall under a certain category of the GST. Here, we will consider the GST effect on Startup eco-system in India.

Benefits of GST for Start ups

Since India is booming with start-up businesses, GST would be applied to them as well. Start-ups would also come under the GST slab and would have their own benefits, making more people enter into start-up businesses and help start an economic boom in India.

Benefits of GST for Start ups

Starting off with minimum capital, the start-up ecosystem would greatly appreciate GST as it would give them many benefits, such as follows:

  • Lesser complexity in tax
READ  GST Council 23rd Meeting: Major changes in GST Rates

Start-up companies would not have to worry about the different state and central tax as GST will be one complied tax rate that they would have to pay and not be burdened by different and complex taxes.

  • Easy to register

Unlike in the past, where a business had to be registered in each state that it wants to do business in, under GST it only needs one permit to do business everywhere as far as paying taxes and hence, it will become easier for new businesses to get registered.

  • Can scale the business easily

Since the registration of start-ups will not be difficult under GST, the business will also get a permit to work in different states with one permit while paying the taxes. This will allow the start-up business to take their business forward, scale up in bigger areas, and get new customers easily.

  • More exemptions from taxes

Different GST tax slabs will be applicable to the different turnover of the business, and the start-ups would be able to save more money due to the greater exemption on taxes. This will allow them to put the money back into the business and expand it faster.

  • The logistics of the business will be smoother

GST will allow the transportation of goods from one state to another more freely and the business expense of keeping higher stocks would also be reduced, making it an advantage for start-ups to control their logistics in a proficient manner.

There are many more advantages that the new law will bring about and other GST effect on Startup and encourage more people to start newer businesses in order to boost the economy and provide consumers with better products and services. GST laws[1] will boost the confidence of these businesses as they would be attracted by the immense benefits they would get under this system as compared to the old one.

READ  Applicability and Impact of GST on Healthcare Services Sector in India

Disadvantages of GST for Start-ups

Although there are many advantages to this kind of taxation, there are a few disadvantages for start-ups as well, such as follows:

Disadvantages of GST for Start-ups
  • Additional weight

GST can levy an additional weight on the start-up taxes if the business is small and does not generate the decided income.

  • Documentation cost

The e-commerce sector start-ups will have to document on a quarterly basis and this will increase their document and organization cost, which in turn would increase the cost of the goods for the final consumer.

  • Mandi Tax

GST may levy an additional mandi tax, although this aspect of the tax is not clear yet, and this could affect the food and nourishment start-up businesses as they may have to pay an additional tax.

  • Less clarity

Since the GST system is new and only being introduced now, it has yet to give clarity to some policies and products that will be taxed in certain slabs. This will take time for the government to streamline the entire system for different industries and therefore, could be a little confusing for the start-ups. It will only after sometime when the dust settles that one can understand the GST effect on Startup or any other industry.

Even though there are certain disadvantages with GST, there are more advantages with GST that surface in the economy, which would bring about positive changes in the country and boost the economy. The economy would seem inviting for the start-ups and more businesses will be able to flourish with innovative products and services. GST is supposed to streamline the economical taxes and make it effortless and effective for the business to operate and provide quality products and service to the consumer. Even though the entire process may take some time to settle into different industries, the businesses should take advantage of the new regulations, boost their businesses, and reach larger consumer audiences in the country.

READ  Meaning of SEZ and GST Implications on SEZ Units

The advantages that the GST will offer to start-up businesses will give a number of people the confidence to start their dreams.

The competition would also increase because of GST, which will keep the prices of goods and services under GST at a level which can be afforded by the consumers and not let the start-ups quote abnormal prices. Therefore, GST is a big win for start-up companies and would help their ecosystem gain a lot of boost in the upcoming years. It would be a bigger motivational factor than the previous tax system as it would be providing the businesses with a lot of benefits. Even the smaller start-ups will benefit in many ways as the registration has been made easy and will be able to reach larger groups of consumers in order to market their products and services.


I hope this article was of some help to understand the GST Effect on Startup Eco-System in India. If you have a startup or are willing to take an initiative in that area, we are here to provide all the help and guidance that you need for the same.

Read our article:GST Rates 2019: Updated Tax Slabs after 37th GST Council Meeting

Trending Posted