ClearTax in a sweet spot for next wave of growth as GST proves game changer

The firm's tech platform for I-T and GST returns is currently used by 600,000 businesses, 40,000 CAs and tax professionals, and over 1,000 large enterprises

While there are fintech firms galore in India, very few are working in the products space. ClearTax is one product-focussed new age company working in the tax filing space. In a recent New York Times-CB Insights report, this Bengaluru-headquartered firm has been put in the list of 50 start-ups seen as potential unicorns in coming years.

Founded in 2011 by three friends -- Archit Gupta, Srivatsan Chari, and Ankit Solanki -- ClearTax was also the first Y-Combinator funded company of India in 2014. "Being the first company to be funded by Y-Combinator is a great turning point in our journey. As far as the potential of becoming a unicorn is concerned, we believe our company will be worth a lot more than a billion dollars one day, and that belief is shared by more people now," said Archit Gupta, founder & CEO, Cleartax in an interaction with Business Standard.

ClearTax, which provides a technology platform for filing both income tax and GST returns, is currently used by 600,000 businesses, 40,000 chartered accountants and tax professionals, and over 1,000 large enterprises. Beginning its journey in the space of direct tax, the firm currently has one of the largest base of income tax filers, who use its platform to file annual returns. The company claims that customer stickiness is very high, giving an opportunity to the firm to cross-sell many financial products in the near future. "On the income tax side, we are the market leader. So, cross-selling opportunities are huge, as many people today are still not using online platforms to buy investment-related products," Gupta said. "Our target customers are millennials, mostly aged under 30," he added.

No wonder, the tech-driven firm has already started cashing in the opportunities of cross-selling by launching its own online mutual fund platform. In a short span of time, the platform has been among the top-10 online distributors of mutual funds in India in terms of new customer additions.

Gupta also believes low customer acquisition and retention costs make it immensely possible for the firm to scale up this business model. "We have the lowest acquisition cost in the industry. That means, low cost of customer acquisition and retention make our model immensely scalable," he says.

While the direct tax space is growing for ClearTax, it is GST (Goods & Services Tax) that has been proved to be the real game changer for the firm. With around 12 million registered tax payers under the GST net, the firm is eyeing a big opportunity in the indirect tax domain. "Right now, it will be more than 100,000 businesses which are using our platforms to file GST returns and that is growing. To us, this is a big opportunity," he said.

While big audit firms and many other companies have developed their own tax-filing platforms, ClearTax doesn't think the competition will have any negative impact on its business. "Competitors will widen the market, which is good for the whole industry," Gupta said.

With the demand for its software products rising, the company had raised $50 million from clutch of investors led by Hong Kong-based Composite Capital in October last year as part of series B round funding. The firm had previously raised $12 million from SAIF Partners along with $2 million in seed funding from Sequoia Capital India, and Paypal co-founder Peter Thiel’s Founders Fund Angel in 2016.

"A lot of the money raised through the current round will be invested in software development," Gupta said. "Team building is another focus area. We were a small team before this round of funding. From 300, we have already raised our headcount to 500 in the last four months," he added.

As the universe for GST grows apart from the increase in income tax filers, ClearTax is the company to watch out as the tech-driven firm is clearly on a sweet spot to go up the ladder in coming years.