India is becoming a tough environment for startups due to "unnecessary" compliance-related burden, according to ReferRush founder Vikram Pai. In a social media post on Thursday, he raised concerns over hassles faced by startups in India due to compliance issues. He highlighted that random delays in name approvals and vague documentation rules are slowing startups, turning India into the "worst enemy” for entrepreneurs.
“I love this country. I am building here by choice. But the truth is ugly and nobody wants to say it out loud. Compliance is killing momentum,” Pai said in an X post.
Highlighting delays in basic processes, Pai noted that incorporating a company should take days, not weeks or months. He also pointed out that platforms like Shopify are not subject to the same GST rules, hitting early-stage teams' revenue.
“GST was meant to simplify. For startups, it does the opposite. We pay GST to the government even when platforms like Shopify don't. That slashes top-line revenue and adds insane monthly complexity for early-stage teams,” the startup founder added.
India is slowly becoming its own worst enemy for builders
I love this country. I am building here by choice.
But the truth is ugly and nobody wants to say it out loud.
Compliance is killing momentum.
Incorporating a company should take days. Not weeks or months because of…He explained that ReferRush faced its biggest challenges not due to the product but because of unnecessary delays, such as incorporation and setting up additional entities for escrow and payouts. The startup had to pay GST on transactions that never touched their bank accounts, he claimed.
Pai further said that approving bank mandates to securely store credit cards, repeated KYC and compliance checks for payouts and subscriptions, and export and foreign remittance restrictions made global business difficult.
On top of these hurdles, market realities add further pressure on the startups, he said.
“ACVs in America are higher. Buyers move faster. Less bureaucracy. Higher ROI for the same effort. Yet in India, we tell founders to “build here” while drowning them in paperwork, taxes, and approvals. Teams end up running on jugaad to survive, accumulating tech debt and compliance debt just to operate. If India actually wants to keep its best builders, we need real reform,” Pai suggested.
According to Pai, the government should consider reforming the existing system to make it startup-friendly. He suggested changes such as a 10-day company incorporation process with guaranteed timelines. GST rules should be simplified, with a startup-first approach and easier reporting, he said, adding that banking and payment systems need to be digital and founder-friendly.
“Right now, the system is optimised for control, not innovation. That needs to change. Or the next generation of great Indian companies will be built everywhere except India,” Pai concluded his post.
Pai's post has resonated with many, who said that India's unnecessary bureaucratic system is a major hurdle not just for startups but also for other sectors, such as exports. Many users also pointed out that closing a company is just as painful as opening one.
Bengaluru-based ReferRush specialises in referral sales for eCommerce ventures. The company focuses on setting up omni-channel and fully automated customer referral programme for merchants.
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