Goods and Services Tax Reform and Profitability of Indian IT Start-ups: A Pre- and Post-GST Financial Analysis
Suma D Hiremath
Abstract
Purpose. This study examines whether the implementation of the Goods and Services Tax (GST) was associated with changes in the profitability of selected Indian IT start-ups. Design/methodology/approach. The study adopts a secondary-data, pre- and post-GST comparative design. Financial observations for five selected IT start-ups are analysed using a paired-samples t-test to compare profit before and after GST and profit margins before and after GST. A regression model is also used to examine whether GST paid is associated with profitability. Findings. The mean profit increased from 19.594 lakh before GST to 143.462 lakh after GST, and the paired-samples test reports p = 0.019, indicating a statistically significant difference at the 5% level. However, the regression model shows that GST paid explains only 1.5% of the variation in profit and is not statistically significant (p = 0.604). The profit-margin comparison also shows a numerical increase, but the difference is not statistically significant (p = 0.225). Originality/value. The study distinguishes between a significant pre- and post-GST difference in profit levels and the absence of a significant relationship between GST paid and profitability. This provides a more cautious interpretation of the financial consequences of GST for Indian IT start-ups.