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Atul Gupta

Atul Gupta is a fellow member of the Institute of Chartered Accountants of India and the Institute of Cost Accountants of India, besides a Law Graduate. He is also member of various other professional bodies and Institutions.

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Start Up India- Prospect Under GST

As per the existing laws, the respective industry start up has to get themselves registered as per various thresholds in the centre and state.

The India’s most reformative tax legislature has just entered in the statute books and likely to be implemented from promised date i.e. 01st Jul, 2017. This is for the very first time, that a tax reform would create an impact on people of India at mass level; due to the ultimate tax burden to be borne by the end consumer of goods and services. The Policies of the Indian government are consistently aiming on to restructure & accelerate the Startup revolution. The ecosystem for the start-up in India has grown rapidly since a last decade, thus in the same line the new entrants of market are expecting ease of doing business under GST law. The startup industry will surely be bump by some flattery and harsh provisions of the GST Law. These benefits may be in the form of reduction of cross-border corruption between states, and claim of the credit on taxes paid on expenses in their companies. The key influential factor of the GST in respect of start up industry may be seen as follows:


As per the existing laws, the respective industry start up has to get themselves registered as per various thresholds in the centre and state. The start up in trading industries has to obtain registration as per VAT structure, when the turnover exceeds Rs. 5 lac, which is Rs. 9 lac for the service industry and Rs. 150 lac in case of manufacturing industry liable to the excise duty.

As these all subsume in the GST law, therefore the threshold of Rs. 20 lac shall give a relief to the start up of service & trading industries but will be a hassle for manufacturing industry start-ups.

However, these newcomers would not be eligible for the benefit of the above said threshold of Rs. 20 lac, if they are engaged in the interstate supplies, or liable to pay tax under RCM, or is an E commerce operator, or a person liable to deduct tax at source.

Further GST law is also providing benefit of the composition scheme to lower the tax burden of the small businesses with turnover up to Rs. 50 lac.


In the short-term, it may increase compliance as sellers would have to file returns thrice in a month, compared to once in a tax period (i.e. six months in service tax or quarterly in vat or one month in excise) at present. The Sellers would have to report their monthly sales by the 10th of next month, purchases by 15th and a consolidated statement by 20th of next month. Therefore it would lead to the compliance burden to the newcomer into the market.


The startup industry in India is mainly derived by the service sector, which is in fact carrying the tax burden of the VAT paid on the inputs due to the inefficient tax credit system. The introduction of the GST law will reduce the cost of the output of the start-ups by allowing the credit of the inputs. The smooth flow of the tax credit will create uniformity in the tax structure and the benefit will come in the form of cost reduction (Finance & Manufacturing cost).


The introduction of the GST will also reshuffle the tax administration, which will also come into a less complex hierarchy. Therefore accountability and responsibility of the administration will also be redefined (surely be absolute and definite), and the involvement of the IT infrastructure at mass level will reduce the human intervention in the various approval and procedures in indirect tax. Accordingly, the new entrant to the market (Start-ups) shall be welcomed with corruption free and co-operative tax administration.


The abolition of the lot of checks and gridlock at the various border of the state shall also give a boom to the logistic carriers, which will be a key factor for the startup industry (specifically E-Commerce) to expand the hassle free business nationwide.


Introduction of the GST will surely improvise ease of doing business and also a boost the new entrants to jump freely into the market. Certainly, there may be compliance burden on the start-ups in the form of return filing & other provisions like TCS( specifically for E- Commerce start-ups), but overall these provisions shall regulate the startup industry and will deliver the result in the long run to the entrepreneur and economy as a whole.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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