GST Guide for Indian Startups and Ecommerce Businesses

I've watched too many Indian founders ignore GST until they get a notice. The math isn't hard. The rules are annoying but learnable. And the penalty for getting it wrong is real money and real headaches. So here's everything you actually need to know, without the CA jargon.

Do You Even Need to Register?

Two thresholds to remember. If you sell goods: registration is mandatory once your aggregate turnover crosses 40 lakhs in a financial year (20 lakhs for special category states like those in the Northeast, Himachal, Uttarakhand, and a few others). If you sell services: the threshold is 20 lakhs (10 lakhs for special category states).

“Aggregate turnover” means all your taxable supplies, exempt supplies, exports, and inter-state supplies counted together. It's not just what's in your bank account. If you're invoicing, it counts.

Here's the catch for ecommerce: if you sell through any ecommerce operator (Amazon, Flipkart, Meesho, your own Shopify store with a payment gateway collecting on your behalf), you must register for GST regardless of turnover. There is no threshold exemption. Even if your annual revenue is 2 lakhs, you need a GSTIN. This trips up a huge number of small ecommerce sellers.

Similarly, if you make inter-state supplies (selling from Maharashtra to a customer in Karnataka), mandatory registration applies regardless of turnover.

GST Rates You'll Actually Deal With

There are four slabs: 5%, 12%, 18%, and 28%. Most startup-relevant services fall under 18%. SaaS products, consulting, IT services, marketing services, design work — all 18%. If you're a software company selling to Indian businesses, you're charging 18% GST on your invoices.

For ecommerce, the rates depend on the product category. Most clothing under 1,000 rupees is 5%. Electronics are typically 18%. Luxury items and certain goods hit 28%. You need to get the HSN code (for goods) or SAC code (for services) right on your invoices. Mess this up and your input tax credit claims get rejected.

If you're exporting (selling SaaS to customers outside India, for example), those supplies are zero-rated. You charge 0% GST but you can still claim input tax credit on your expenses. This is actually a significant benefit for Indian SaaS companies with international customers. Your vendors charge you 18% GST, you claim it all back, and your export invoices have zero GST. Free money, essentially.

Input Tax Credit: The Part Most Founders Mess Up

Input tax credit (ITC) is the GST you paid on business purchases that you can offset against the GST you owe on sales. You bought laptops for your team? The 18% GST on those laptops reduces your GST liability. You paid for AWS hosting, Google Workspace, Figma subscriptions? Same thing. The GST on those expenses is recoverable.

The rules for claiming ITC:

You must have a valid tax invoice. No invoice, no credit. Make sure every vendor gives you a proper GST invoice with their GSTIN, your GSTIN, the HSN or SAC code, and the tax amount broken out separately.

The goods or services must be used for business purposes. That laptop your developer uses? Business. The one you bought for your cousin? Not business. If something is used partly for business and partly personal, you can only claim the business portion.

Your supplier must have actually filed their return and paid the tax. This one is painful. You paid a vendor, they gave you an invoice showing 18% GST, but they never filed their GSTR-1. Your ITC claim gets blocked because the invoice doesn't show up in your GSTR-2B. This is why choosing GST- compliant vendors matters. A cheap vendor who doesn't file returns ends up costing you 18% more than you thought.

One more thing: there are specific items where ITC is blocked regardless. Food and beverages, health insurance (unless mandated), club memberships, and motor vehicles (with certain exceptions) — you cannot claim ITC on these even if they're for business use.

GSTR Filing: What to File and When

GSTR-1: Details of your outward supplies. Filed monthly by the 11th of the following month. If you're under the QRMP scheme (turnover below 5 crores), you can file quarterly using IFF for invoices in the first two months.

GSTR-3B: Your summary return where you declare tax liability and claim ITC. Filed monthly by the 20th (staggered dates for some states). This is where you actually pay the GST. Miss this deadline and you pay interest at 18% per annum on the outstanding amount, plus a late fee of 50 rupees per day (25 CGST + 25 SGST), capped at 5,000 rupees.

GSTR-9: Annual return. Due by December 31st of the following financial year. If your turnover is above 5 crores, you also need GSTR-9C (a reconciliation statement, previously required audit).

My advice: don't try to manage this in a spreadsheet once you have more than 20 invoices a month. Use accounting software that auto-generates these returns. The time you spend manually reconciling will cost you more than the software.

Ecommerce-Specific Rules That Catch People Off Guard

TCS (Tax Collected at Source): Every ecommerce operator (Amazon, Flipkart, Myntra) is required to collect 1% TCS on the net value of taxable supplies made through their platform. This means they withhold 1% of your sales before paying you. You can claim this back when filing your GSTR-3B, but your cash flow takes a hit upfront.

Multi-state selling: If you store inventory in warehouses across states (FBA sellers, this means you), you need a separate GST registration in each state where you have a place of business. Shipping goods from your Maharashtra warehouse to Amazon's Karnataka FC is an inter-state stock transfer, and you need to issue yourself a delivery challan. Getting this wrong leads to input tax credit mismatches that are a nightmare to untangle.

Returns and credit notes: When a customer returns a product, you issue a credit note to reverse the GST. This must match with the original invoice in your GSTR-1. High-return categories like fashion (where return rates can hit 25-30%) create significant reconciliation work every month.

Composition Scheme: When It Makes Sense

If your turnover is below 1.5 crores (75 lakhs for special category states) and you only sell within your state, the composition scheme lets you pay a flat rate: 1% for manufacturers, 5% for restaurants, and 6% for other suppliers. You file quarterly instead of monthly, and the compliance burden is much lighter.

The trade-off: you cannot charge GST on your invoices, which means your business customers cannot claim ITC on purchases from you. For B2B businesses, this is a dealbreaker. For B2C retail, it can be a smart move to reduce compliance overhead.

Also, composition dealers cannot sell on ecommerce platforms. If Amazon or Flipkart is part of your sales channel, composition scheme is off the table.

Practical Tips from the Trenches

Get a good CA early. Not after you get a notice. A CA who specializes in startups and ecommerce will save you more in avoided penalties and optimized ITC than they'll ever charge in fees.

Reconcile your GSTR-2B every month. Check that the ITC showing up in your auto-populated return matches what you actually paid to vendors. Mismatches compound fast.

Keep your HSN and SAC codes accurate from day one. Changing them retroactively across hundreds of invoices is miserable.

If you're a SaaS company with both Indian and international customers, track domestic and export revenue separately from the start. Your GST obligations are completely different for each. Kartib has a tax estimation feature that helps Indian businesses keep a running estimate of their GST liability and ITC balance, so you're not scrambling at filing time. It won't replace a CA, but it'll make the monthly surprise a lot smaller.

What Happens If You Ignore All This

Late registration: penalty up to 10,000 rupees plus the GST you should have been collecting all along (which you now owe out of pocket because you didn't charge your customers). Late filing: 50 rupees per day per return. Extended non-compliance: your GSTIN can be suspended or cancelled, which means you can't issue valid invoices and your customers can't claim ITC on your invoices.

None of this is catastrophic if you catch it early. All of it becomes expensive and time-consuming if you let it pile up for two years. Set up your GST compliance in the first month of business, automate what you can, and check in monthly. That's it.