What is the impact of GST on startups and small businesses?

GST Advantages for small business and Startups

GST is seems to benefit all businesses in India, but small business can enjoy for the following reasons:

1.Ease of startup: VAT registration from sales tax is mandatory for any new business. Lot of issues regarding the different procedures and fees if a business operating in many States. To bring uniformity in process and centralized registration that will make starting business and startup expanding in different States much simpler then GST is going to help a lot.

2.Higher exemptions to new businesses: VAT registration is compulsory if any business with a turnover of more than Rs 5 lakh. GST is going to make this limit higher, from 5 lack to Rs 10 lakh and, further to it, businesses with turnover between Rs 10 and 50 lakh will be taxed at a lower rates. This will bring respite from tax burdens to newly established businesses.

3.Simple taxation: At present sitution, a startup business spends lot of time and energy and money to carry the various taxes at various points. The process very complex since there are different regulations at different States. GST will simplify the process by integrating all taxes, making the process of paying tax easier.

4.Short rest for businesses in both sales and services: The calculation the VAT and service tax on both items separately have to be made for the businesses like restaurants, which fall under both sales and service taxation. So this makes the calculations process very complex and rigid. But the tax calculation will be done on total when GST will be implemented because GST will not distinguish between sales and services.

5.Reduction in logistics cost and time across States: Due to small border tax and check post issues many transport vehicles get delayed. As these taxes will be eliminated in GST so interstate movement will become cheaper and less time consuming. This will also bring down costs associated with maintaining high stocks, as there will be disrupted movement of goods. As per a CRISIL analysis, GST can reduce logistics costs of companies producing non-bulk goods (comprising all goods besides the primary bulk commodities transported by railways – coal, iron ore, cement, steel, food grains, fertilizers) by as much as 20 percent.


Critics of GST argue that implementation of this tax will lead to losing the fiscal autonomy (separation of power state and center) of the States and they have to face permanent revenue loss. For a manufacturing State like Tamil Nadu, if taxes are levied at the point of purchase (point of destination) and not on point of sale (point of origin), it can lead to permanent losses close to the tune of Rs 9,270 crore. However, the government has offered to pay compensations to States for the losses borne by them for a transition period. Sailotech is going to provide the GST Solution and service whenever the GST will be implemented.