Goods and Services Tax:Its Impact on Businesses and Startups

To streamline and introduce uniform taxation across the country, The Government of India introduced the Goods and Services tax, commonly referred to as the GST. It will help streamline the economy by doing away with multiple taxes imposed by both the central and state governments.


It’s designed to unify all taxes and eliminate the burden of double taxation on businesses across the country.

GST is a revenue framework which emphasizes on making the tax collection process and administration much easier. The Goods and Services Tax will cover all the taxes such as entertainment tax, luxury tax, VAT, service tax, sales tax, octroi, purchase tax and replace it with a uniform tax structure to be followed throughout India. Moreover, it will significantly reduce the paperwork as it will eliminate the complicated calculations of various taxes; thereby, creating a truly unified market in India.

How it Works?

Currently, Goods and services are taxed separately by different authorities like District, State and Central Government. But, with the implementation of GST, only value added tax will be charged at all levels of the supply chain and credit will be allowed if any taxes were paid earlier on inputs acquired for use in making the supply.

Read More: How is Tax filing done in Private Limited Company?

The GST will consist of CGST, taxes which will be paid to the central government, SGST, taxes which will be given to state governments and IGST, whenever there is an interstate supply within India.

The base and other design features will remain same for both the CGST and SGST, and this dual tax scheme will fetch a rate from 17%to 19% making goods less expensive.

What Will Be its Impact on Businesses and Startups?

Unlike earlier, when various compliances on the ground of taxes had to be filed by both startups and established businesses alike, once the GST comes into effect, it will lead to simplification of taxes leading to easier tax calculation, making starting or running a business much simpler.

Read: The Entrepreneurs Smart Checklist: Starting Up in India

E-commerce start-ups will rejoice once GST is implemented as their courier will not be stuck at different state border checkpoints and they can deliver their products faster. Thus, GST will make the business more efficient and effective. Moreover, one tax system will attract more investors as there is ease of investing in this system.

By eliminating the various central and state government taxes, GST will increase the profit margin and there will be a reduction of cost in every stage from producing the good to finally selling it.

As of now, VAT has to be paid up by the startups if turnover is more than Rs.5 lakhs; whereas, once GST is implemented, start-ups will only have to pay VAT when their revenue goes above Rs.10 lakhs.

GST will be profitable to every section of the Society in the long run and by making the tax structure simpler, GST will boost India’s Gross Domestic Product(GDP) and businesses will start to reap the benefits of a reformed and more streamlined tax structure.

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