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Everything Franchisees Need to Know About GST in 2025

Everything Franchisees Need to Know About GST in 2025

Last updated on: August 4, 2025 at 12:30 PM

In recent years, Goods and Services Tax (GST) has transformed the way businesses operate across India, unifying the tax structure and making it easier for entrepreneurs and franchisees to comply. However, understanding the nuances of GST, especially for franchisees, can sometimes be challenging. As we enter 2025, it is essential for franchise owners to be equipped with the latest knowledge to ensure smooth business operations and compliance. In this blog, we will break down GST in simple terms and discuss everything franchisees need to know in 2025.

What is GST?

GST is a consumption-based tax levied on the supply of goods and services in India. It replaced a myriad of indirect taxes such as VAT, excise duty, and service tax. GST is designed to streamline the tax system and create a single market across the country. For franchisees, understanding GST is crucial as it directly affects the financial health of their business.

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GST for Franchisees in 2025: Key Updates and Insights

  • GST Registration Requirement

    Every franchisee who has a turnover exceeding Rs. 20 lakhs (Rs. 10 lakhs for special category states) is required to register for GST. If your business operates in multiple states, GST registration will be required in each state. The threshold limit is subject to periodic revisions, so it is essential to stay updated on these regulations.

  • GST on Franchise Fees

    Franchise fees are an important component of the franchise business model. As per GST regulations, the franchise fee is considered a taxable supply and is subject to GST. Franchisees must charge GST on the fees they receive from their franchisors. Typically, franchise fees are taxed at a rate of 18%, but it is advisable to consult with a tax expert to understand specific rates that may apply to different services.

  • Input Tax Credit (ITC)

    Input Tax Credit (ITC) allows franchisees to claim a credit for the GST paid on business expenses like rent, utilities, and inventory purchases. This can significantly reduce the overall GST liability. However, to claim ITC, franchisees must ensure that the supplier from whom they purchase goods or services is GST-registered and complies with the tax regulations.

  • Impact of GST on Pricing and Margins

    As GST is applied to both the goods and services purchased by franchisees, it may impact the overall pricing strategy and profit margins. Franchisees need to understand how GST will affect their cost structure and, in turn, how they price their products or services. Effective management of tax credits and compliance can help minimize the impact on profitability.

  • Filing GST Returns

    Franchisees are required to file GST returns on a regular basis. Depending on their turnover, the frequency of filing may vary. Small franchisees may file quarterly returns, while larger businesses may have to file monthly returns. It’s crucial to maintain accurate records of all transactions to avoid penalties and ensure timely filing.

  • GST and E-commerce Sales

    If your franchise operates through an online platform or has an e-commerce component, GST compliance becomes even more complex. Franchisees involved in e-commerce must be aware of the GST rules related to online sales and marketplaces. These rules include tax collection at source (TCS) and specific GST rates for goods sold through digital platforms.

  • GST Audits and Compliance Checks

    The government is taking stricter measures to ensure GST compliance. Franchisees should be prepared for audits and compliance checks, especially as the authorities focus on preventing tax evasion. Maintaining proper documentation and being transparent about financial transactions can help avoid fines and legal complications.

Steps to Ensure Smooth GST Compliance

  • Consult a GST Expert

    As GST regulations can change frequently, it is advisable for franchisees to regularly consult with a tax consultant or GST expert. They can provide guidance on registration, tax rates, filing returns, and managing ITC. This is where we can help you by providing GST related services.

  • Automate GST Processes

    Implementing automated accounting and GST software can simplify the process of filing returns, tracking tax liabilities, and maintaining records. This helps reduce human error and ensures compliance.

  • Educate Your Team

    A well-informed team can help streamline the GST processes within the franchise. Franchisees should invest in training their staff to understand the importance of GST and how it affects daily operations.

  • Keep Track of Changes in GST Rules

    Tax laws are continuously evolving, so staying updated is key. Franchisees should subscribe to updates from the GST portal or work closely with their tax consultant to remain informed about any changes.

Conclusion

GST is an essential aspect of running a franchise business in India, and understanding it can be the key to ensuring smooth operations and growth. As we move into 2025, franchisees must stay informed about the latest GST rules, tax rates, and compliance requirements to safeguard their business. By staying proactive, leveraging technology, and consulting experts, franchise owners can navigate the complexities of GST with confidence and focus on growing their business successfully.