Impact of GST on small business

GST has been the most discussed topic all over India. It had great impact on almost every industry; but before starting with its impact on small business let us first get an idea of GST.

What is GST?

GST (Goods and Services Tax) was introduced in India on 1 July 2017. It is an indirect tax which has replaced all other taxes which were levied by the central and state government. The GST rate is different on different commodities. GST is administered by both Union and State government.
Now, that we have got idea that what is GST, we will get some idea of small business.

Small business

Businesses are termed as small depending upon country and industry. Small businesses are privately owned corporations, partnerships. They have generally less employee strength and in some cases even less annual revenue than a regular-sized business or corporation. Small businesses are distinguished in many ways like according to revenues, shipments, sales, assets etc. ; but the number of employees is one of the most widely used measures.
Till now we have got all the information about GST and small business and hence we are ready to know the impact of GST on small businesses.

Impact of GST on small business

In Indian economy small businesses have been the primary growth drivers. Almost 50% of industrial output is contributed by small businesses. After GST, like other business sectors even small enterprises have been affected. Registration for GST, Tax Payments, Refunds and Returns are carried out through online portals only. Hence, from now small scale enterprises don’t have to worry about interacting with department officers for carrying out these submissions.
Here is the impact analysis of GST on small businesses in India.

Submission Procedure Pros Cons
Registration Online registration guarantees the receipt of certificate of registration. There will be minimal rules and regulations in this interface. Not every small scale enterprises have experts to deal with online systems. Hence, most of them will be in the need of intermediaries for registration. This will be adding up into their registration cost.
Payment This will bring transparency. Even the compliance cost will be reduced. For payment, funds are required to be maintained. These funds are required to be in the form of electronic credit log with the tax department. This may result in financial crisis for some industries.
Refund Quick refunds will be possible due to online refund process. This will enhance the transparency for small enterprises. Only after filling relevant returns refunds can claimed. It also depends on the rules and regulations and even on the ratings of the company.
Returns All returns are required to be filed electronically and input  tax credit and tax liability adjustment will happen automatically on the basis of these returns Minimum of thirty-seven returns are required to be filed by every registered taxpayer during a financial year. Thus small enterprises will have to deploy additional resources and eventual cost of compliance will increase


Without any doubt, GST will open up a can of worms which will be having great impact on the small scale businesses across various fields. It is natural for a pervasive and a country-wide reform, as GST is given mixed reviews. It will have acceptance that will be varying from state to state. GST, in short have its effect on the entire Indian economy. There is no doubt that GST is aimed to increase the base of taxpayer, mainly in small business into its scope and will put the burden of rules and regulations and cost on them. Indian small scale enterprises will be able to complete with foreign companies.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.


  1. I can say that GST has both positive as well as negative impact on small and medium business owners. GST has made it possible for people to start their business in India with ease. Before GST, every new business owner has to obtain the VAT registration, and it was so hectic because the rules and regulation for VAT registration procedure is different for different states in India. But now after GST has come the new businesses just have to get registered for GST that has a centralized process and it’s done. Small businesses which have a turnover between 5 lakh – 10 lakh do not have to apply for the GST return. And this reduces the complexity of their work flow. So we can say that GST has some positive impact too on small and medium businesses in India. And along with GST, a software has also been launched which has made the work flow of business companies easy, which is known as GST software. GST software in India not only help in reducing the complexity of work flow but also helps in dealing with the supplies of goods and services of the company. To avail accounting software for GST , just visit GSTKeeper website that can help you in making all kind of business accounting in a very simple way

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