Small businesses bleed cash as GST kicks in before payments
India’s GST law requires firms to pay tax earlier of invoicing or payment received, but the general practice is to clear dues 45-90 days after invoicing. For small businesses with delayed payments and little input credit, that’s a direct hit to working capital.
Every month, Deepali Bhagat is taxed on income that hasn’t reached her. The founder of a small ed-tech firm in Bengaluru, Bhagat must pay goods and services tax (GST) on every invoice she raises—even when clients delay payments for months. The burden eats into her working capital, sometimes pushing her to borrow or dip into savings just to stay compliant. By year-end, nearly 3% of her revenue is lost to GST on unpaid dues.
