MSMEs foresee a mix of opportunities and challenges under GST regime

MSME (Micro small and medium enterprises) share a major presence in the Indian economy with a contribution of 37.54% to its GDP. Also, it has been continuing to maintain a strong foothold in the market contributing to nation building. The role of MSME role is very crucial with regard to job creation, employment generation, increase in income of people and the overall economic growth.

The Ministry of MSME with a total budget of Rs. 85.705Cr, including Government of India’s contribution of Rs. 58.105Cr during 2017- 18 to 2019-20 has decided to implement Digital MSME scheme for promotion of information communication technology in the MSME sector. Through this the government envisions to make MSME digital, and plan to promote ICT in MSME industry along with the implementation of the scheme.

The GST regime holds an enormous opportunity for various sectors of the economy and is expected to herald a new era of indirect tax regime. By replacing various indirect taxes, GST is expected to be a key step in the field of indirect tax reform in India.

The uniform tax reform under GST is expected to provide a uniform market for MSMEs. By cutting down multiple taxes, this reform will increase the flexibility in transfer of goods, hence reducing the total business cost. Also with GST enabling a centralized registration, starting a business would be much easier. With this act of standardising the process under the new tax regime, many other activities like purchase of capital goods and products, reduction of tax burden on new businesses will help to boost this sector.

Challenges under the GST regime...

However, just like the opportunities, the GST regime also throws up a few challenges for this sector. A section of the MSME industry holds an opinion of GST posing potential challenges for the sector. They point out the reduction in excise duty threshold as their primary concern, as post GST implementation the exemption limit will likely to get lower to 25 lakhs from 1.50cr. This means companies with turnover of more than 25 lakhs will have to pay the excise duty. They claim, as a result the MSMEs especially, the small level enterprises will have to pay a large portion of their earnings in form of excise duty, hence putting burden of tax on them. Also it is believed to increase the cost of the products for businesses that supply directly to end users and no differentiation between luxury and normal goods will affect largely the SMEs competing against large enterprises.

Nevertheless, for faster GST compliance, various efforts have been taken by the Ministry of MSME such as, a GST cell has been formed at NIMSME, Hyderabad and a digital MSME scheme has been approved to make MSME units become GST friendly.

For a better and an efficient GST implementation, the govt. is also promoting digital MSME in which cloud computing will play a pivotal role. The government is putting lot of efforts and encouraging MSMEs to adopt the cloud technology, as it is emerging as a cost effective and viable alternative.

In conclusion, GST poses both opportunities as well as challenges to the MSMEs. The final verdict however can only be given after the implementation of the bill which is expected to rollout from July 1, 2017.

Tags: MSMEs, GST regime, GST, GSTN, Ministry of MSME, Digital MSME scheme, NIMSME, Challenges under the GST regime