5 Recently Announced GST Relief for Startups and Small and Medium Businesses

The Goods and Services Tax (GST) bill, which was first introduced in the 2006-07 Union Budget, and finally passed in the Parliament in August last year (2016) came into effect on July 1st this year. Since then, the bill has been a bone of contention and caused much more trouble to merchants and business owners rather than the relief that was being anticipated by the government.

Seeing the growing unhappiness over the bill, the Modi government has decided to bring in some piecemeal reliefs. In the latest GST council meeting held on October 6, the council decided on various relief for Startups and Small and Medium Businesses.

For the uninitiated, under GST, all the major taxes in India like excise duty, octroi, service tax, special additional duty and VAT will be subsumed into a single tax called GST.

5 of the major recommendations that have been made by the GST council at its 22nd meeting for SMEs were:

1) Ease In Return Filing And Payments For Startups

In order to facilitate the ease of payment and return filing for SMEs with annual aggregate turnover up to Rs 1.5 crores, the council has recommended that starting from the third quarter (October-December) of this financial year, such taxpayers shall be required to file quarterly returns in FORM GSTR-1,2 & 3 and pay taxes only on a quarterly basis.

Further, the registered buyers from such small taxpayers will also be able to avail ITC monthly. The due dates for filing the quarterly returns for such taxpayers will be made known soon. Meanwhile, all taxpayers will have to file FORM GSTR-3B monthly until December 2017. All taxpayers are also required to file FORM GSTR-1, 2 & 3 for the months of July, August and September 2017. Due dates for filing the returns for the month of July 2017 have already been announced. The due dates for the months of August and September 2017 will be announced soon.

2) GST To Be Paid On Advances Received From Customers Relaxed

During the meeting, it was uncovered that requirement to pay GST on advances received was proving to be quite a big headache for small dealers and manufacturers. So, in order to reduce their burden, the council decided that the taxpayers having annual aggregate turnover up to Rs 1.5 crores will not have to pay GST at the time of receipt of advances on account of supply of goods. They will required to pay GST on such supplies only when the supply of goods has been successfully made.

3) Reverse Charge On Inward Supply From Unregistered Taxpayers Has Been Suspended

The council meeting recommended that the reverse charge mechanism under Sub-section (4) of Section 9 of the CGST Act, 2017, and under Sub-section (4) of Section 5 of the IGST Act, 2017, will be suspended till March 31, 2018. It will be reviewed again by a committee of experts after the end of the intended period. Experts are optimistic that this move will have small businesses in reducing their compliance costs substantially.

4) Service Providers Making Interstate Supply Are Exempted Up to Rs 20 Lakhs From Registration Under the GST Bill

For the uninitiated, anyone who is making inter-state taxable supplies, except inter-state job worker, has to register, irrespective of their turnover. This particular rule was hampering the export sector the most. Although exports has been categorised as “zero-rateded” and hence 0% GST was applicable to it, but since exports were essentially “inter-state sales”, hence registration was mandatory for them.

Under the new recommendations, it has been decided that those service providers whose annual aggregate turnover is less than Rs 20 lakhs (Rs 10 lakhs in special category states except J & K) will be exempted from obtaining registration even if they are making inter-state taxable supplies of services. This particular recommendation is most likely to reduce the compliance cost of small service providers.

5) Composition Scheme Threshold Increased

According to new recommendations made by the GST council in its latest meeting, the composition scheme will be made available to taxpayers having an annual aggregate turnover of up to Rs 1 crore as compared to the current turnover threshold of Rs 75 lacs. The turnover threshold for Jammu & Kashmir and Uttarakhand will be Rs 1 crore. This threshold of turnover for special category states, except Jammu & Kashmir and Uttarakhand, will be increased to Rs 75 lakhs from Rs 50 lakhs.

This increase in the turnover threshold will allow a greater number of taxpayers to avail the benefit of easier compliance under the composition scheme. It is also expected to benefit the MSME sector greatly.

This development was first reported in YourStory.

5 Benefits And Drawbacks Of GST For Startups To Know

Finally the motto of ‘one country, one tax’ has become reality. The Friday midnight (June 30, 2017) was the revolutionary night for the Indian economy as Goods and Services Tax (GST) came into force at midnight, amid a historic midnight session in the Central Hall of Parliament. President Pranab Mukherjee, Prime Minister Narendra Modi, and Finance Minister Arun Jaitley addressed the gathering, before the President and the Prime Minister pressed a button to mark the launch of GST.

GST, on one hand, has created an ease of business for companies by bringing all state and central level levies and taxes under one roof on the other it has increased the compliance.

“GST will be a relief for Indian businesses given that we will be done with multiplicity of taxes, tax cascading, ambiguity in applicability of certain tax provisions pertaining to the industry along with introduction of robust technology framework to support automated time bound processes for tax collection, ITC utilisation, refund mechanism and dispute resolution. GST rules on exports may cause hardship for exporters, such as receipt of payment in convertible foreign exchange for classification under export, taxability of transactions between Indian head office and foreign branch office, and taxability of SEZ units with refund mechanism. Hopefully, over time, GST Council along with other concerned bodies will resolve the concerns of different stakeholders and offer a tax-friendly environment needed for continuous development of Indian economy,” says Nishank Goyal, CEO, Masters India.

Looking at the current structure and reporting requirements under GST, it would require e-commerce aggregators to hand hold their sellers and educate them on the compliance requirements.

“We are expecting a reduction of rates due to the implication of Anti-Profiteering law on the rates of products which is speculated to go upwards. Also, the tax on discounting will bring all the e-com players on the same ground where the companies will not be able to influence the customer by undue discounting of products. GST has definitely increased the compliance burden on the seller as well the e-com operator as the number of transactions are huge and tracking the minute details of each and every transaction within 10 days of month end will be a challenging task for the smaller player like us. Overall GST is definitely creating huge opportunity and is a boon to the industry but with unknown quantum collateral damage,” says Harsh Shah, Co-founder, Fynd.

We at IndianWeb2 have jotted down few benefits and drawbacks of GST for startups.

So, here are the must know benefits for startups of GST:

1. One Country, One Tax

Before GST come in force, one has to calculate different taxes which would make the process complex and burdensome. But with effect of GST, where all indirect taxes are subsumed into one single tax making tax calculations simple with less paperwork. And this will largely benefit the startups catering the software industry. Previously, VAT, service tax and excise, all the 3 or at least first two are applied on software products or service which will now reduce to single tax.

2.Ease In Doing Business With Single Registration

Earlier startups have to register again and again for different taxes or different states. But now with GST coming into effect, startups have to register only once on GST network and they can do business in any part of India without any hassle, making India a common market for startups and leading a way for expansion of their businesses.

3. Startups Eligible For Higher Threshold Limit

The growing businesses which are at nascent stage that is with an annual turnover of less than Rs 20 lakh are out of the tax net under the GST regime. Previously, threshold limit of service tax was 10 lakhs while the threshold limit of VAT varies from 5 lakhs to 20 lakhs in different states. But now, with increase in the threshold limit under the GST regime has bring a relif to budding startups. Startups are now eligible for higher threshold limit of 20 lakhs (10 lakhs in case of North East states). Not only this, startups whose annual turnover is less than 50 lakhs can opt for composition levy at a lower rate.

4. Lower Logistic Cost

GST will prove to be a much needed boon to e-commerce websites. As per the CRISIL report, GST will reduce logistics cost by 20% helping in reducing the cost of e-commerce startups. Reduction in logistics cost will also lead to more business for logistics companies.

Hassle free movement of goods in a common market will help startups in delivering goods early to customers since state border checks used to delay the movement of goods from one state to
another. This will also bring down the inventory and storage cost of startups.

5. Reduced compliance cost

With GST coming into effect, the overall compliance cost will be reduced as now there is only one tax and provisions related to act to comply with. GST network will also ensure transparency in calculation of taxes and input tax credit.

These are the few benefits startups will have due to GST coming into effect. But with every new policy coming into effect, there are few challenges and drawbacks associated with it.

So here are 5 must know drawbacks of GST for startups:

1.Not a Single Rate Of Taxation

India has opted for dual model of GST due to which we have C-GST and S-GST for intrastate transactions and I-GST for interstate transactions. Many critics argue that these three are nothing but the new names for Central excise/service tax, VAT and CST.

2. Cross set off of levy is not allowed

In proposed GST, the input credit of C-GST cannot be set off against S-GST and vice versa. While in present system set off of excise duty and service tax is allowed.

3. Increase Tax Rate

The main drawback of GST is for servicing startups. That is startups who provides services only have to pay service tax at the rate of 18%, an increase of 3% in tax rate for such startups. This is one major disadvantage of GST for the startups since majority of Indian startups are engaged in services sector. With introduction of GST, they have to increase prices to compensate such increase in tax since they can’t afford to absorb more losses.

4. Exclusion of Other Taxes

GST will not be the only indirect tax that a startup has to pay. Apart from GST, Startups will have to pay custom duty on imports since custom duty is kept out of preview of GST. Further electricity, real estate etc. have been excluded from GST which may lead to a mangled Indian version of GST.

5. Filing Return On Regular Interval

According to GST guidelines e-commerce startups have to file quarterly has well as monthly returns on GST network. Further they will also have to collect taxes from sales made on their portal .This will lead to increase in documentation cost for such startups.

How GST will Impact Startups in India

The whole GST debate has been going on since forever. The Goods and Services Tax (GST) bill, which was first introduced in the 2006-07 Union Budget and was scheduled to be implemented in 2010-11, was finally passed in the Parliament in August last year (2016). While the government is now mulling over the list of over 5,000 goods that will be taxed under the upcoming GST, the Indian Startup Community has a mixed feeling about the whole bill and the impact it will have on their businesses.

While a majority of the startups believe that as and when the bill comes into action, it will help in reducing cross-border corruption between states, simplify the currently complicated taxation process, and let them claim the credit on taxes paid on expenses in their companies. On the other hand, Indian ecommerce biggies like Flipkart, Snapdeal and Amazon are worried about the rules related to tax collection at source, or TCS, which is a provision in the GST (Read Here).

From July 1, 2017 onwards, major taxes in India like excise duty, octroi, service tax, special additional duty and VAT will be subsumed into a single tax called GST.

The move might increase compliance in the short-term as sellers would have to file a return thrice in a month, compared to the current process which requires them to do this once in six months. According to experts, when the bill comes into action, sellers would have to report their monthly sales by the 10th of each month, purchases by the 15th and a consolidated statement by the 25th of each month.

Grocery retailing startups are particular happy with the government's GST Bill as the government has allowed 100 percent FDI in food retailing. These startups have a lot of service tax credit, and once the bill comes into play, this service tax credit will get converted into GST credit. As of today, they are not able to offset service tax credit against anything else. Hence, GST will give them a lot of tax advantage.

Logistics sector to be a huge Winner

The GST will result in the abolition of a lot of taxation bottlenecks at state borders and make the whole of India one single market. It will also help in reducing the currently prevalent price anomalies between different states in the country.

Taxation software startups are also going to see a boom in the business. Since many Indian startups are in the e-commerce business and their logistic costs goes up with 11 categories of taxes levied on the road transport sector, GST can help them in drastically reducing their logistic costs by as much as 20 per cent. A lot of online marketplaces have already started educating their sellers on GST compliance.

Indian startups currently operating in manufacturing sector have to follow a number of state regulations besides having to pay state taxes. In addition to this, many states have a threshold beyond which startups have to register for VAT, if a startup has a turnover of Rs 5 lakh. But, under the GST, the threshold is Rs 20 lakh.

Sellers and marketplaces have Mixed Feelings

While online sellers are joyous about GST as they will be able to offset total tax liability against tax paid on expenses such as office stationary etc., which was currently not possible.

However, marketplaces such as Amazon, Flipkart and Snapdeal have voiced their concerns over the 2 per cent tax collection TCS, stating that it should be sellers who should be paying this tax.


The GST bill is most likely to benefit e-commerce users as the movement of goods between states will become faster and cheaper.

How GST will Impact Startups in India

The whole GST debate has been going on since forever. The Goods and Services Tax (GST) bill, which was first introduced in the 2006-07 Union Budget and was scheduled to be implemented in 2010-11, was finally passed in the Parliament in August last year (2016). While the government is now mulling over the list of over 5,000 goods that will be taxed under the upcoming GST, the Indian Startup Community has a mixed feeling about the whole bill and the impact it will have on their businesses.

While a majority of the startups believe that as and when the bill comes into action, it will help in reducing cross-border corruption between states, simplify the currently complicated taxation process, and let them claim the credit on taxes paid on expenses in their companies. On the other hand, Indian ecommerce biggies like Flipkart, Snapdeal and Amazon are worried about the rules related to tax collection at source, or TCS, which is a provision in the GST (Read Here).

From July 1, 2017 onwards, major taxes in India like excise duty, octroi, service tax, special additional duty and VAT will be subsumed into a single tax called GST.

The move might increase compliance in the short-term as sellers would have to file a return thrice in a month, compared to the current process which requires them to do this once in six months. According to experts, when the bill comes into action, sellers would have to report their monthly sales by the 10th of each month, purchases by the 15th and a consolidated statement by the 25th of each month.

Grocery retailing startups are particular happy with the government's GST Bill as the government has allowed 100 percent FDI in food retailing. These startups have a lot of service tax credit, and once the bill comes into play, this service tax credit will get converted into GST credit. As of today, they are not able to offset service tax credit against anything else. Hence, GST will give them a lot of tax advantage.

Logistics sector to be a huge Winner

The GST will result in the abolition of a lot of taxation bottlenecks at state borders and make the whole of India one single market. It will also help in reducing the currently prevalent price anomalies between different states in the country.

Taxation software startups are also going to see a boom in the business. Since many Indian startups are in the e-commerce business and their logistic costs goes up with 11 categories of taxes levied on the road transport sector, GST can help them in drastically reducing their logistic costs by as much as 20 per cent. A lot of online marketplaces have already started educating their sellers on GST compliance.

Indian startups currently operating in manufacturing sector have to follow a number of state regulations besides having to pay state taxes. In addition to this, many states have a threshold beyond which startups have to register for VAT, if a startup has a turnover of Rs 5 lakh. But, under the GST, the threshold is Rs 20 lakh.

Sellers and marketplaces have Mixed Feelings

While online sellers are joyous about GST as they will be able to offset total tax liability against tax paid on expenses such as office stationary etc., which was currently not possible.

However, marketplaces such as Amazon, Flipkart and Snapdeal have voiced their concerns over the 2 per cent tax collection TCS, stating that it should be sellers who should be paying this tax.


The GST bill is most likely to benefit e-commerce users as the movement of goods between states will become faster and cheaper.

Amazon, Flipkart, Snapdeal Come Together Against Draft Model GST Law

In what could be seen as a deeply ironic move on the part of Indian ecommerce startups, founders and top officials of India's ecommerce biggies like Flipkart, Snapdeal and Amazon have come together and joined hands in a mission to get changes done in the draft model Goods and Services Tax (GST) law.

Their reasoning behind the move is that all of them are worried about the rules related to tax collection at source, or TCS, a provision in the GST.

If and when the TCS rule comes into action, all the ecommerce companies in the country would be required to collect and remit taxes on behalf of the sellers on its platform. Since almost each of these websites have thousands and thousands of merchants and sellers on their platforms, they argue, this would end up being an extremely cumbersome and time consuming activity for them. In addition to this, it would even discourage sellers to join their platforms, which would end up affecting their business. Hence, the ecommerce companies strongly believe that the GST bill in its existing form with the TCS clause has the potential of bringing the whole of country's e-commerce industry to stagnation.

Goods and Services Tax (GST) was first introduced in the 2006-07 Union Budget and was scheduled to be implemented in 2010-11. But, the bill was finally passed in the Parliament in August last year (2016).

Ironically, when the bill was passed, there was a sentiment of cheer and celebration in the startup industry with some even taking to Twitter to express their opinions on the bill.

Officials of these ecommerce biggies are contesting that a thorough impact analysis of this tax provision on the online marketplaces had not been carried out diligently by the government. And now, with the draft model GST law due to be finalised at the end of February, there's a sense of panic and commotion in the industry.

Flipkart's Sachin Bansal in a tweet dated 3rd Aug, 2016 wrote, "#GSTBill will not only unlock huge productivity but also create millions of formal sector jobs."

Resonating with his sentiments was Snapdeal's Kunal Bahl, who took to Twitter after the bill was passed in the parliament on 3rd Aug, 2016 and wrote, "Welcome passage of #GSTBill! Digital commerce removed geographical barriers, GST will remove tax barriers. One India means faster growth."

But they now seemed to have made a U-turn on their sentiments back then in August, 2016 and joined hands with SMEs, sellers and banks asking the government to do urgent amendments in the model GST law. They all are sure that if the law is implemented in its current form, it would do them more harm than good.

Let's see if the group succeeds in pressurising the government to make the amendments in the law. Whatever be the case, we will keep you updated.