GST Advantage for Start-ups and Small Businesses

gst advantages

The GST bill was passed in the Lok Sabha in 2015. The concept has evolved over a decade of discussions involving how to implement it in the best possible manner. Now that it’s all cleared up, the GST is ready to be rolled out in July 2017.

We’re going to look at certain advantages that this monumental change in our tax system will bring to small enterprises and start ups. Any person who supplies goods and services is liable to pay the GST. While there is a basic exemption limit for small suppliers of such products and services, the tax is payable to all.

Ease of Business
Businesses currently have to undergo VAT registration from the state’s sales tax department to start on their own. It gets more difficult to get a VAT for every state since each one has a different regulation regarding its VAT law.

This is where GST comes into the picture. Every process will become centralized and will speak of a uniformity beyond the domestic boundaries of a state. New businesses can say goodbye to multiple VAT registration since all they now need will be one registration under GST, which will be applicable across the country.

Integration of Multiple Taxes
At present goods and services are taxed under various VAT registrations that exist, in various forms, across various states in India. Each state has a separate VAT rate, regulations, procedure, etc. in addition to the VAT and sales tax, there are others that businesses must adhere to like CST, purchase tax, luxury tax, etc.

Under the GST regime, all these taxes will under one umbrella and be made into one single tax. The following taxes will be merged with GST. Returns will also be common.

Central taxes including central excise duty, service tax, additional customs duty, special additional customs duty, central purchases and cess.

State taxes include VAT, central sales tax, octroi and entry tax, purchase tax, luxury tax, taxes on lottery, betting, gambling, state cess and charges, entertainment taxes.

GST Exemption for Startups and Small Businesses
As of now, businesses crossing an annual turnover of Rs 5 lakh (Rs 10 lakh in some states) have to have VAT registration and VAT payment as a necessity. This multiple VAT regulations across states is bound to be confusing.

The problem will, however, not exist when GST comes into the picture. Once implemented, businesses with a supply turnover of less than Rs. 20 lakh would not have to register for GST or even collect it. Additionally, those with a turnover between Rs. 20 and Rs. 50 lakh may have to pay the GST at a lower rate, under the composition scheme. This only gives a big impetus to startups with a nominal turnover thus bringing them relief from collection and filing of GST returns, etc.

Bring Improvement
All businesses, as of now, be it goods or services, have to comply with various VAT and service tax regulations across the state, which only adds to the complexity of the whole procedure of running a business. With the introduction of GST, the difference between goods and services will be gone. Also, invoicing will be easier for businesses since there would only be one rate across.

A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.


  1. Pl confirm, any new business , which has products ( of 28% gst slab ) with turn over less than 20 lacks , need not pay gst for those items, who are under 28% category ?

    Can a manufactruing unit, which turn over is less than 20 lacks , can sell its products to other state customers ?

  2. newly started business on 13/07/2017 and product (Ayurvedic medicine under 12% GST rate), production in West Bengal and sale in Tripura (yearly turnover assume less 20 lakh )

    No VAT registration but want to registration under GST.

    What is the procedure to registration in GST for newly started business?