Top 3 reasons — SaaS Startups need robust Sales Tax Compliance solutions

Before the GST era, sales tax compliance was relatively easy to understand and comply with, states the World Bank[1]. Since the introduction of GST, there have been multiple policy updates. It resulted in technical as well as compliance issues for many Indian businesses. On the other hand, the rise in digitized services has become the key to sustainable business growth. This shift towards software and technology is no more an exception. It has eventually led to the emergence of numerous startups offering advanced SaaS solutions worldwide.

Today, we have many subscription-based software providers, popularly known as SaaS providers. With India heading for growth and innovation, the government anticipates becoming a $5 trillion economy by 2025[2]. Currently, the Indian SaaS market accounts for 2–4% of the global SaaS market, which is expected to reach 7–10% by 2025[3]. With this hyper-growth comes the toil to cope with the ever-evolving sales and use tax compliance.

Multiple challenges come along with adherence to the sales tax compliance requirements. We refer to it as the ETC challenge -

The ETC (Error | Time | Cost) Challenge

Researching, calculating, reporting, and filing returns to comply with tax laws is time-consuming, costly, and prone to errors. It’s often overwhelming for a SaaS startup owner to cope with the number of tasks. They seek zest on their upcoming funding from Angel Investors, curate the best-performing teams, and approach potential customers.

For a streamlined financial and operational workflow, massive startup collaborations have formed and are often called ‘third-party collaborations.’ It works by paying a recurring fee to use the software — whether a CRM tool, an accounting platform or a digital collaboration suite like Microsoft 365, Google Workspace or Slack. For technology vendors, SaaS collaborations allow quicker integrations and better customer experience.

Sky-scraping competition, however, compels these startups to invest more time in reinventing their core systems. It leaves behind very little time and resources to manage financial chores, especially sales tax compliance.

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