GST Rules for Start-ups in India

Jun 11, 2019 . 7 min read

The goods and services tax (GST) has vastly impacted the way startups function in India.

To begin with, GST has abolished certain central and state taxes, and clubbed everything under the larger umbrella of its identity. Not only has this made it easier for most businesses to function, it has also eliminated certain norms like VAT, making it far more convenient for smaller businesses like start-ups to flourish in the Indian economy.

In this article, we will take a look at how GST has impacted start-ups, as well as whether there are any additional rules for start-ups to follow under GST.

In order to understand all of this, we must first understand the taxes that have been abolished, as well as the way smaller businesses used to function in India before GST came along.

Taxes subsumed under GST

Various central taxes as well as State Government taxes have been subsumed under the GST regime. Some of these include the following:

Central taxes:

• Service tax
• Central excise duty (which also includes additional excise duties)
• Central surcharges and cesses
• Special additional duty of customs (SAD)
• Additional customs duty (CVD)

State government taxes:

• Purchase tax
• Luxury tax
• Value added tax (VAT)
• Octroi and entry tax
• Central sales tax (CST)
• Entertainment tax
• Taxes on lottery, betting and gambling
• State cesses and surcharges

How were start-ups paying taxes before GST?

Before GST, there was the dreaded VAT. Any company that enjoyed an annual turnover of Rs 5 lakh had to pay VAT. As a result, small businesses with hardly any profit had to bend themselves backwards to pay taxes, which would make it even harder for them to sustain themselves.

However, with the GST in play, the exemption for having to pay tax moves up to a turnover of Rs 20 lakh.

As a result, more and more start-ups are now able to sustain themselves and their growth before having to be subjected to taxes.

Now that we have a basic idea about how start-ups functioned before GST, let us take a look at the various benefits that GST offers small, budding businesses in India!

The benefits of GST for start-ups

GST offers a wide range of benefits to start-ups. Some of these include the following:

• Simple tax processes: As start-ups have tight budgets and tighter deadlines, they cannot always afford to spare resources to oversee a myriad of tax compliances that fall under VAT, excise, service tax, CST, and so on. With GST in place, most of these taxes are eliminated, making it much easier for them to be on top of filing their taxes and returns. Furthermore, start-ups that deal with services and goods together just need to file a single tax instead of different ones
• Simple online procedures: Gone are the days when people had to run around tax offices, waiting in lines day in and out only to be told to come back the next day. Now, the procedure occurs online, making it not only simple, but also extremely quick. If you keep all your documents in perfect order, then filing your taxes becomes a task that’s reduced to a few simple clicks
• Ease of business for ecommerce sites: With ecommerce services being a big sector in India, the implementation of GST has been a huge boon. Let us say you are an online marketplace that delivers goods all over the country. With different VAT laws in different states, you were required to file various tax documents accurately and on time. With GST, this issue is totally eliminated

Cash-strained start-ups stand to gain many financial benefits thanks to the implementation of GST. With a much higher threshold for registration, tax credits on purchases, and ease of processes, GST has definitely proven to have brought relief for the smaller companies in India.

All of this, of course, has been a part of the bigger picture to promote the growth of start-ups in India. So it makes sense for it to have so many advantages for these budding businesses.

How can start-ups make the process of invoicing much easier?

The answer to this lies in using Razorpay Invoices – a smart product that helps you auto-generate GST-compliant invoices in a single click.

Razorpay Invoices is a product that prides itself on its speed and efficiency, calling itself an invoice that can be paid instantly. In order to use it, businesses must follow three simple steps:

• Create the invoice: The easy-to-use platform allows you to create multiple invoices with total ease. All it takes is entering the goods- or service-related details along with the amount and the GST percentage. Once you click on the create invoice button, the platform will generate the same, ready for use
• Notify your customer: After the GST-compliant invoice is created, you can send the invoice’s unique link to your customers via an SMS or an email
• Receive your payments: Your customers can then immediately initiate a transaction in order to make the payment

Additionally, your customers can also download the invoice and save it if need be. If you want to initiate partial payments on an invoice, that can also be carried out in a transparent manner to ensure all your business processes are followed correctly.

The Razorpay dashboard not only shows you the invoices that have been sent and cleared, but also shows you valuable consumer insights that can come in handy while crafting your business strategies.

Moreover, you can create templates of your invoices or certain line items to make sure that you don’t have to create the same things again and again.

Using Razorpay Invoices can reduce the effort you put into this part of your business. You now have freer resources and more manpower to dedicate to other aspects of your business, such as product development and marketing!

Written By

Harshitha Rao

Harshitha is a Content Marketer at Razorpay. She loves to write about everything from AI to travel, from healthcare to fintech and everything in between! She’s an avid reader and also, quite a bit of a singer!