GST Rules for Small business

GST Rules for Small business and Startups in India

PUBLISHED ON: Jul 04 2023

Goods and Services Tax (GST) in India has significantly impacted how startups and small businesses operate. GST has combined all indirect taxes under a larger umbrella and eliminated some of the indirect taxes. It was launched under the slogan "One Nation, One Tax" to simplify compliance procedures for businesses, particularly startups. In this blog, we'll look at how GST rules have affected startups and whether startups need to follow any additional GST rules. 


GST Rules For Small Business & Startups

Under the GST rules, businesses with a yearly revenue of Rs. 20 lakhs require GST registration in India. However, any company with a revenue of more than Rs. 40 lakh in a financial year requires GST registration. The limit here is Rs. 20 lakhs for businesses in the Northeastern states of Uttarakhand, Jammu & Kashmir, and Himachal Pradesh. 

Startups must register for GST as per the GST rules for small business. Startups that are subject to the RCM, or Reverse Change mechanism, supplying services or goods on eCommerce portals or to eCommerce aggregators, casual taxable individuals, TCS/TDS deductors, non-resident taxable individuals wishing to start a business in India, and data recovery or access service providers must also register for the GST. 

Composition Scheme for Small Businesses

GST composition scheme was introduced in India per GST Rules for Small business. Businesses with an annual revenue of up to Rs. 10,000 can benefit from this scheme by paying lower small business taxes. Businesses can choose to participate in the scheme on their own initiative. The composition scheme requires businesses to pay taxes equal to a predetermined percentage of their total revenue. They cannot claim an input tax credit for purchases. 

Simple Procedure For GST Registration and Return Filings:

Gone are the days when people had to run around tax offices to get a registration number and submit documents. Now the online process for GST registration has made the registration and return filing procedure simple and quick. The entire GST registration and return filing process can now be completed online, making it simple and extremely quick. Obtaining a registration number is just a few clicks away if all the documents are on hand.

Startups that are short on cash stand to gain a lot under GST. Startups and small businesses in India have benefited greatly from the GST's ease of implementation, significantly higher registration threshold, tax credits for purchases, and other benefits.

Benefits of GST Registration for Startups and Small Businesses 

Startups that are cash-strapped stand to gain numerous financial benefits from the implementation of GST. With a significantly higher registration threshold, tax credits for purchases, and simplified procedures, GST has unquestionably alleviated startup and small business concerns in India. 

Previously, the turnover threshold for registration was different in each tax law. Businesses that are tax-registered have increased as a result of the GST, which is a consolidated tax on both goods and services. In addition, certain unorganized sectors have been brought into the tax net as a result of the stricter laws surrounding input tax credits. 

Additionally, the majority of the technology behind GST is technological. Online registration, return submission, application for a refund, and response to notice are all done online. 

How can small businesses and startups in India claim input tax credits under GST? 

In India, startups and small businesses can claim the GST's input tax credit by following these steps:

Ensure that all suppliers comply with the GST:

Businesses under the GST Act have access to the Input Credit Mechanism. All suppliers must comply with the GST and have deposited the tax they collected from you in order to claim the input credit. As a result, it is essential to ensure that all suppliers comply with the GST. 

Keep proper records of purchases:  

Businesses must keep accurate records of their purchases in order to claim input credit. Credit notes, bills of sale, and invoices are examples. 

Match and validate input credit:  

Before a company can claim any input credits, they must be matched and verified. As a result, the supplier's tax deposit and the business's tax on purchases must be matched. The input tax credit cannot be claimed if there is a discrepancy. 

Use your GSTIN to claim the input tax credit: 

In order to submit GST returns and claim input tax credits, a GSTIN, or Goods and Services Tax Identification Number, must be provided. In order to claim the input tax credit, businesses must ensure that they have a valid GSTIN. 



GST has significantly altered the way small businesses and startups operate in India. With the implementation of GST, startups that are strapped for cash are in for a financial windfall. Certain indirect taxes have been eliminated as a result of the implementation of the GST, which has combined all taxes under a single, broader umbrella. However, startups and small businesses in India have benefited greatly from the GST.

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