IMPACT OF GST ON BUSINESSES- A Case Study by Numberz

Introduction
There was palpable excitement on the 27th floor ‘YesFintech’ meeting point in the YES BANK
Tower. YES BANK, India’ fourth largest private sector bank and Numberz, a startup which is
solving everyday workflows of small and medium businesses in India, had joined hands in a
bid to revolutionize the way financial inclusion was visualized in India.
The YES BANK team seemed kicked with the idea of combining business and taxation with
banking, a Numberz formula which in collaboration with YES BANK – will solve the entire
hassle of doing business, managing cash-flow, paying taxes, banking and reconciliation of the
entire process. With a lot of push from the government to GST, the whole idea of taxation will
change in India. This will create several issues for the first few months till the time it settles in
the country.

Background: What is GST?

It is the first overhaul in our taxation system since 1947, yep, that’s right the first major change
since Independence. (It’s the 101st Amendment Bill- a fact for your history trivia buffs).

Figure 1 Bifurcation for Indirect Taxes in India

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GST is the Goods and Services Tax. Right now, across India there are different taxes and tax
rates. The GST Bill aims to say adios to all that confusion and implement a single tax and rate.
Let’s dive into how it’ll impact the business:
 Can the Indian Tax System be tamed? Earlier business owners had to work with
various tax departments of each state and compile their returns based on several
regulations. With the new GST, these issues will be a thing of the past as all taxes
will be integrated and the process of filing taxes is much simpler.
 Sales Tax, Service Tax, VAT- too many taxes? Currently business owners have to
pay many different taxes and it can take a lot of time to compute them separately.
Now GST will combine all taxes and give them a uniform payment rate.
 Can they imagine a world of easy logistics? When transporting their goods from
one state to the next, your vehicles are now stopped at the borders for checks.
Interstate movement will change drastically as these checks will be shorter and
these taxes will be eliminated with the GST.
 Open, Click, Startup: All new businesses require a VAT registration to function
and this can be complicated when operating in many states and following different
procedures and fees. The introduction of GST will allow a single process of
registration and help new startups enter and expand easier than before. With the
Digital India and Startup India initiatives, entrepreneurs can also register your
startup online.
 Who doesn’t like exemptions? Businesses having to pay a higher VAT for a
turnover of more than Rs. 5 lakhs will now be exempt upto Rs. 10 lakhs and above.
If business owners have a higher turnover, their reason to cheer as tax on turnovers
between Rs. 10 to 50 lakhs will be considerably lower.

What are the different tax rates?

The GST Council recently put forth a four-tier tax rate system of slabs fixed at 5%, 12%, 18%
& 28%:
- There are two standard rates of 12% and 18%
- There will be a 5% tax rate on goods that fall under the category of mass consumption
- The tax on essential items have been reduced while that on luxury goods will be higher
- Roughly 50% of goods that fall under the consumer inflation basket will be kept at 0%
to tackle inflation, while the items that will incur the 28% tax rate were previously
taxed at 30-31%

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 Figure 2 Comparison between old & new system of taxation

Impact of GST on small businesses?

When the nationwide goods and service tax rolls out on July 1, it is likely that micro and small
enterprises will under-report their yearly income. Firms might do so to stay in the INR 20-50
lakh bracket so that a low tax rate of 1-2 per cent applies to them.

Increased compliance under GST will benefit firms in the long run by providing them access
to cheaper capital and lower input costs, in the short term, the switch from the unorganised
to organised sector will make them less competitive.

GST, in its current proposed form, exempts small businesses below Rs 20 lakh from
registering for the GST network (GSTN) unless they want to avail of the benefits of input
credit. Small businesses, according to GST, will be in the Rs 20-50 lakh bracket. Analysts say
a number of businesses with turnover above Rs 50 lakh could resort to under-reporting their
income to pay lower taxes.

It will improve their chances to get access to credit from primary financial institutions instead
of raising fund from the secondary market. After demonetization lending rate offers are
bound to go down by financial institutions. Registering and expansion policies will be easier
in Goods & Service Tax (GST) regime as India will become one market. Hence now selling
goods across states becomes easier as intrastate transactions because cross-border taxes are
being eliminated.
Also once small business gets Goods & Service Tax (GST) registration, it needs to generate
GST based TAX invoice for compliance. This comes as a big challenge for small business
owners as they don’t have enough budget to support the infrastructure required for meeting
all the compliances in this digital era. But once all the invoices and cash flow actually move
on to cloud solution and then it gets automatically reconcile with the master database of
Indian government for Goods & Service Tax (GST) filing. Cloud-based solutions will play an
important role in letting these small businesses file their GST with ease, both in terms of
efficiency and monetary benefit. Security of these cloud-based solutions is the key issue for
any small business out there as they have very specific customer segment and they play in
the niche market with their product or services. Hence for any SMB to adopt one of many
cloud-based solutions is going to be a key decision for data security. SMB needs a single

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platform where it can manage its own cash flow, raise invoices, manage expenses, file GST
and get easy credit facility.
Impact of GST on different sectors

Figure 3 Impact of GST on different sectors

Nu,mb,erz GST
Once the GST is implemented, over 60 million invoices are going to be uploaded every month
and the infrastructure as well as the ecosystem has to be ready for the same. Numberz has
developed a product specifically to settle all the issues which are going to come in the coming
months.
Numberz GST will help the business owners in the following ways:
 It will reform the business process and make them GST compliant.
 Business owners and accountants can collaborate and file GSTRs, reconcile them with
their vendors and customers, and also can integrate it with other ERPs.

This collaboration of Business, Taxation and Banking is set to revolutionize the way business
owners solve their workflows. However, to truly be a sustained ‘game-changer’, the Numberz
GST solution has to move beyond simple and basic solutions.

Problem Statement

You are a key member of the Innovation team of Numberz. You are given the responsibility
to provide a go-to market strategy for Numberz GST.

1. Identify the main challenges during the initial months post the launch in the following
sectors:

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  E- Commerce
 Manufacturer
 Trader – Single/Multi state
 Digital Marketing agency

2. Use your creativity to imagine financial services for the future. How will these
solutions look (design), work (tech) and feel (emotional). Solve for short and long term.

The solution document has to be in word/pdf within 1000 words (excluding exhibits and
excel sheets) in Book Antiqua font 11.