03 · DPIIT startups and GST — what recognition does and does not do

DPIIT is the Department for Promotion of Industry and Internal Trade. Recognition under the Startup India scheme is a certificate for an eligible private limited company, LLP, or registered partnership that is working on innovation / improvement of products, services, or processes, and that meets age and turnover tests published on the Startup India portal.

What DPIIT is actually for (mostly not GST)

• Income-tax: possible deduction under section 80-IAC for eligible startups (conditions, Inter-Ministerial Board, three years in a ten-year window). That is corporation tax, not GST.
• Angel-tax: DPIIT-recognised startups that file the required declaration have historically been outside the old 56(2)(viib) net on specified share issues. Again, income-tax.
• Self-certification under specified labour and environment laws for a period.
• IPR fast-track / reduced fees in notified schemes.
• Public procurement: exemption from prior experience / turnover in many GeM and government tenders (read the bid).
• Banking and Fund of Funds access are policy, not a GST exemption list.

State GST reimbursements — not a Central exemption

Some state industrial / startup policies reimburse a part of SGST actually paid and deposited, for a few years, if you manufacture or operate in that state and file on time. That is a grant after you have complied. You still register, still invoice, still file. If you skip GST thinking “the state will exempt us,” you usually get neither the reimbursement nor a clean GSTIN.

How a typical DPIIT SaaS / services startup should think

1. If you sell only intra-state services and stay under ₹20 lakh (₹10 lakh in special-category states) and none of Section 24 applies, you may stay unregistered — but enterprise customers will push you to get a GSTIN.
2. The day you take a GSTIN, start charging GST on taxable domestic B2B and B2C (unless a specific exemption applies). Issue tax invoices with HSN/SAC.
3. Do not opt composition. Composition blocks tax credit and is a poor fit for interstate work, marketplace work, and B2B buyers who want ITC. Phyntara will only let a composition company issue a bill of supply.
4. Export of services (foreign customer, foreign exchange, and the other place-of-supply tests): generally zero-rated. File a LUT (Letter of Undertaking) on the portal so you need not pay IGST on export invoices, then claim refund of accumulated credit where eligible — or pay IGST and refund. This is CA territory; capture the bills in Phyntara so the pack is not a WhatsApp zip.
5. AWS, Google Cloud, GitHub, Figma, WeWork / office rent, legal retainers: take tax invoices in the company’s GSTIN. That is your credit. An unregistered founder’s personal card with no GST invoice is usually lost credit.
6. Founder salary is not a GST supply (employment is outside GST). ESOP / share subscription is not how you “pay GST on funding.” Convertible notes and SAFE-like instruments need a CA, not a GST rate guess.
7. If you sell through an Indian app store or marketplace that is an e-commerce operator, compulsory registration can apply even when you are tiny.
8. If AATO in any year from 2017–18 has crossed ₹5 crore, e-invoice (IRN) is generally mandatory for B2B. Turn the flag on in Letterhead and connect IRP. A PDF without IRN is not a valid B2B tax invoice for that GSTIN.

Goods startups (D2C, hardware, food processing)

• Inter-state goods: register before the first interstate invoice, even if turnover is ₹2 lakh.
• E-way: if you move goods and the consignment is at or above the notified value (Phyntara uses ₹50,000 for the e-way prompt on tax invoices), generate e-way. Turn “We move goods” on in Letterhead.
• Packaged food, cosmetics, and toys have rate and HSN traps. Wrong HSN is not “close enough.”
• Job-work and contract manufacturing: the principal and the job-worker both have GST chores. Capture both sides’ bills.

What to set in Phyntara on day one