There are more than 7.9 million MSMEs in India dated 27th March 2022, as per the Ministry of Micro, Small, and Medium Enterprises. Nearly 30% of the country’s manufacturing production comes from MSMEs.
In the 2022 Statista report, there are nearly 110 million Indians who worked in MSMEs in the financial year 2016. As compared to the rural areas the Urban areas secure higher MSME employment.
Micro businesses show the greatest proportion of employment in the country in the specified duration.
MSMEs are the biggest supporter of India. To facilitate the sector the Indian government launched the GST act dated 29th March 2017 which come into force on 1st July of the identical year.
The government trusted that a feasible tax system and a single market shall surge operational effectiveness, especially for MSMEs.
Advantages of GST for the MSMEs Sector
Mentioned below are the advantages and forthcoming objectives of the GST Act:
- The number of indirect taxes would get reduced.
- As there are some GST compliances, furnishing the GST return does not take so much time.
- The whole process of GST registration could be performed online.
- Post receiving the GST registration would be easier to perform interstate business via e-commerce operators.
- GST has regulated unorganized business sectors through the support of an online process.
- Once a GSTIN is allotted then the same could be used for all the GST aspects.
- GST furnishes the composition plan to file the taxes at a fixed rate and lowers the tax liability along with the tax rates.
- Following the compliance, you could simply claim the ITC.
- It is simpler to find out the tax avoidance under GST registration.
- The purpose is to draw more companies under the GST ambit. Goods and services consumption would be motivated.
- GST fixes reasonable prices for the product or service.
How are MSMEs Managing GST Compliance?
At the start of this year, in 2022, Local Circles reached out to Indian businesspeople, gathering their feedback on the GST in their professional lives. The discoveries of the survey comprise:
- Corresponded to pre-GST business taxation, 37% of companies would consume more time on GST compliance.
- 50% of companies mentioned that their monthly accounting costs have surged since the GST has incorporated.
- 75% of the companies revealed that invoice matching for the inputs and outputs would be the major issue with the GST. There are only 45% of the companies have a good experience with GST while 24% said their poor experience.
- On the GSTN website, the issues like connection troubles, logging-in delays, and submitting the information are commonly seen issues that the business suffers from.
GST Recommendations for MSMEs
- Over-MB documents are unable to upload to the portal this limitation has to be expanded. Only for 24 hours, the e-invoicing would be valid, the limitation or time must be extended or the e-invoices should automatically be emailed to companies.
- If the turnover is more than Rs. 10 cr then e-invoicing would be applied From October 1, 2022, it must not be done for MSMEs.
- GST registration can be performed online, however, the physical verification could be performed by the state GST departments. Thus MSMEs should communicate with the staff of the GST department that gives the measures for corruption.
- It is tough to find out about the new registration that comes beneath the state or central jurisdiction. Concerning their state jurisdiction office information, new registrants or taxpayers usually encounter a lot of misconceptions.
- There are countless legal and factual issues hence the income tax department requires a separate tribunal. On Petroleum products, there is no GST.
Recommended: Major Destructive GST Provisions for the Indian MSME Sector
Government Relaxation in Respect of GST for MSMEs
Various actions are taken for MSME growth by the government as it is conscious of the immense contribution of the sector. The same has comforted several MSME-related compliances as part of the GST regime. For instance, the initial exemption level for commodities, which was Rs. 20 lakhs, has been increased to Rs. 40 lakhs. The yearly limit for the composition program was increased to Rs 50 lakhs for the services and Rs 1.5 cr for commodities. Those who deal in the composition would be allowed to provide the services.
GST has the purpose to increase the number of taxpayers majorly in MSME and the same may put a load on them regarding compliance along with the concerning expenditures. But with time, GST would make the same MSMEs more competitive by drawing MSMEs and large corporations into equilibrium. MSMEs would be enabled to compete with overseas rivals who have low-cost manufacturing hubs like Bangladesh, China, and the Philippines.
