0GST Impact in MSME Sector:
Medium Small and Minor enterprises contribute approximately 37% of our Nations GDP. Implication of GST, substantially affecting this segment, in an adverse manner, may directly knock off the player from the competitive business market. This article tries to put forth various issues that this industry could face upon passage of GST. This article also attempts to provide the possible solution for the issues highlighted as explained below.
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Low Basic Threshold Limit for goods:
In GST regime efforts has been made to maintain the rate of tax prevailing right now. Keeping ssi exemption limit to Rs. 20 lacs is beneficial to MSME since earlier there were liable to registered with VAT department after crossing turnover of Rs. 10 Lac. Further composition scheme is also there for MSME. Further, in some cases of e-commerce, reverse charge, output inter-state supply activities etc. there is no basic threshold exemption given. The definition of the term ‘aggregate turnover’ also includes exports and exempt supplies meaning thereby even if major part of the supply is exempted but a mere small portion is taxable which is less than Rs.20 lakhs still the activity would require GST compliances to be adhered to.
In the present business environment, exemption of Rs.20 lakhs is very low and the same needs to be pegged at a little higher side. If the exemption threshold of Rs.20 lakhs continued then almost all small and medium enterprises would fall under the bracket of GST taxation which will be a radical change for them as compared to the existing taxation scenario. Further, a fair differentiation must be made in any taxation framework between a small or start-up’s and a large and established one. The benefit of additional higher slab for small yet growing sector has to be given to keep balance and allow opportunity for small sectors to grow. Non-bifurcation of this could lead to erosion of this sector and also bring monopolistic market of large players instead of competitive market. The ramifications of bringing down the threshold limit curtails the competitive edge of small and medium scale businesses and therefore, it is suggested that Government should come up with some notification providing the relief in this regard which is in the best interest of this sector and supports its growth objective.
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High Compliance burden:
It is seen that GST law demands high compliance. Key compliance requirements are as under:
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Two returns and one statement to be filed in each month for every state and the details in such statements and return must be furnished HSN code wise, subject to relaxations provided on the basis of turnover. Further, returns must be filed for TDS, ISD (if applicable). Also, one annual return with reconciliation statement is required on every registration number wise.
