GST and MSMEs
GST is the central Direct taxation process. Since its introduction, it has streamlined the processes and brought about a efficiency and regulation to set a fair and level playing ground. On the one hand this increases the need for compliance and filing – a task in itself as severe penalty is being levied in case of non conformance and ignorance is not a choice, on the other hand increase adoption and acceptance / submission by units has led to gorwing tax collections – which augurs well for the future to bring about a regulated and possibly lower tax regime
As per GST (https://gst.kar.nic.in/latestupdates/GSTMSMEsBooklet01072019.pdf) In accordance with the provision of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are defined according to their annual revenue (i.e. sales) of business. As approved by the Union Cabinet, Micro Enterprise is an enterprise whose annual turnover does not exceed ₹ 5 Crore; Small Enterprise is an enterprise whose annual turnover exceeds ₹ 5 Crore but does not exceed ₹ 75 Crore; Medium Enterprise is an enterprise whose annual turnover exceeds ₹ 75 Crore, but does not exceed ₹ 250 Crore. The MSME sector contributes significantly to the national economy and is the largest employment provider besides being a breeding ground for entrepreneurship and skill development. The number of MSME is more than 30 million employing around 100 million people. In spite of having the potential and inherent capabilities to grow, MSMEs in India have been facing a number of problems like sub-optimal scale of operations, technological obsolescence, supply chain inefficiencies, increasing domestic and global competition, fund shortages, change in manufacturing strategies and turbulent and uncertain market scenario. To survive in such a scenario and compete with large and global enterprises MSMEs need to be supported and assisted to ensure sustained growth and development of these enterprises in the existing competitive arena. In terms of GST, the compliance in terms of time, cost as well as energy is much higher for MSMEs vis-à-vis the bigger companies. This impacts them much more as compared to the bigger companies. Therefore, some relaxation benefits are necessary in order to help them cope with sudden increase / change in compliance challenges. Accordingly, with GST in place, the Small and Medium Enterprises have been accorded with a lot of benefits in terms of compliance reliefs given in the form of threshold exemptions, Composition levy schemes, the Quarterly filing of the GST returns to mention a few. While doing so, it has also been kept in mind that they do not become uncompetitive and are also given all the benefits of GST like uninterrupted ITC in the supply chain etc.
The Government has considered the MSMEs as an integral part of nation building. ‘The micro, small and medium enterprises (MSMEs) sector is of special significance for the Indian government, expecting it to offer higher employment opportunities by 2020. In line with the commitment to MSME sector, relaxations have been or are being implemented for them. As MSMEs become accustomed to a larger compliance climate, a better level of preparedness and discipline in conducting business will gradually be a part of operation. With the government’s commitment to strengthen MSMEs on all fronts including GST, it is expected that the current challenges would be stabilized and the industry gradually take a positive turn to fulfill the nation’s vision’.
To know more about GST and understanding the various taxation requirements contact@nat-cons.com