The new provisions for the MSME sector are expected to cause a lot of trouble for micro, small & medium enterprises across the country, as they must become more compliant in terms of filing returns, or might have to pay penalties otherwise. This is also expected to affect the business of the MSME sector by increasing their compliance in regards to the GST system.
The below mentioned 4 major provisions beneath the GST regime would leave the MSME sector in problem:
- The assessee should file the full GST dues prior to furnishing the GST summary return (GSTR 3B).
- GSTR 3B shall not be furnished until and unless the late payment interest at 18% would be paid.
- The assessee would restrict from furnishing the outward supplies report GSTR-1 when he losses to files GSTR 3B in the former month.
- Post to obtaining the GST payment via MSME if the MSME supplier does not remit the amount to the government then the ITC would get restricted.
These are one-sided and tough for the 4 major provisions under the MSME sector. Why it is, below is the elaboration.
MSMEs are said to be the suppliers for various large corporates who are now initiating that MSMEs furnish their GSTR-1 form within the stipulated time so that they could claim the ITC. GSTR-1 was paid via MSMEs within time till now as the same was not being linked to any payment or to furnish any additional kind of report. However, a new circular has amended the same by demanding that the former month GSTR 3B should get furnished. Various MSMEs who are unable to furnish GSTR 3B would get blacklisted/penalized through the large firms, moreover get penalized through the GST department in the way of much more interest and penalties.
Are MSMEs Not Able to Remit GST Dues within Time?
The same shall have the unfairness of the concern. The GST would be levied by the government and the MSME assessee would see to collect that, ITC deducts, and file the dues to the government by the 20th of the subsequent month. In this, the assessee would have the role of the agent of the government.
However, the government asks MSME to file the dues. It is not possible as MSMEs do not secure the bargaining power to overpower the payment to their customers who furnished post 60 to 90 days.
The issue is that when the customers do not furnish the GST
within time, the MSME would need to default since the GSTR 3B form could be furnished post 100% dues are filed. The major issue is that when the assessee files the dues the government would use the part money however shall not diminish the interest towards the part payment. Now the issue is that MSME would be required to pay 18% interest as well as the GST dues every month.
Problems of One Side
Questioning GST council meeting why it is insisting that MSMEs pay and then only file the GSTR 3B, answering: The same would support in settling the IGST dues to the state government within mentioned time.
The other side concern is the interest rate when the GST department files a refund with a dealy to the assessee, the government would file the interest at 6% per annum. The assessee should file 18% per annum if the assessee defaults on its payments to the GST council. IT dept furnishes 12% interest per annum upon refund but GST would only file 6%.
Another treatment is that if the MSME furnishes GST to its supplier and the supplier does not remit the same amount to the government in the mentioned time, the MSME would be refused the input credit and need to file the whole GST amount to the department with the interest and the penalty. The MSME would furnish the GST twice without any fault. With 12% to 18%, there are various items on which the GST is imposed and is more than the profit made by MSME. The transaction will become unprofitable again after furnishing the GST twice.
Why it is so, have no reason for that. What would be the basis for arriving at the last date to claim GST? What would be the basis for the late ITC, reason is only that the GST payment gets late? FM and GST officials must opt for immediate action against these sections and provides the revisions to amend all the four provisions, particularly for the MSMEs.
Reasons for the MSME GST Payment Issues
The same would be the poor payment record of the Ministry of Micro, Small & Medium Enterprises (MSME) customers. Both the government along with the private sector. As per the MSME Samadhaan portal, that would be made to track the late payments to the MSME, 1.17 lakh applications were being furnished by MSMEs. However, these applications would be exclusively for the disputed payments needed for the arbitration. The same would not cover the undisputed late payments.
Central and State governments are the biggest defaulters. For instance, at Rs 1.23 trillion, dues to power producers up 17%; six states account for 70%.” tax experts specified that the major cause why these 6 states are responsible for the huge dues to GENCOs would because the state governments sometimes unable to file the subsides to the discoms within time. Indeed the government departments would not immediately pay off their electricity bills.
In November the news from Karnataka mentioned that “Karnataka State Contractors’ Association says bills worth Rs 17,000 crore are due at the end of October 2021”. As per the report via AP in June 2022, the AP government mentioned that the duration of the payment shall not be guaranteed and they need to insert some precise condition in the contracts that specifies “Note: the payment of bills will be made based on the availability of plough back funds. In case of any delay in payment, the contracting agency shall have no right to challenge in a court of law. Only such contractors who can wait till realisation of bills without approaching the honourable courts only need to bid for the works.” the government is unable to pay the dues within the time than how it could expect MSMEs to file their dues on time.
The government along with PSUs would need to file an 18% per annum interest
Government and the private parties must penalize the late payments and make it compulsory for all governments since “all MSME payments and interest will be as per the MSMED Act 2006”. The same should be augmented through the online portals in which MSMEs could upload their invoices and the government should approve the invoices within 30 days so that due payments would be shown clearly. The computation of the interest would be done transparently. Unless the same would be completed, the government does not secure any right to ask for the payments.
