Quick Summary
India's small and micro businesses remain the backbone of the economy, contributing nearly one-third of GDP, over 35% of manufacturing outputand almost half of total exports. However, FY26 has turned into a particularly challenging year for the MSME sector, battered by geopolitical uncertainty, disr
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FAQ :
MSMEs are facing challenges including the fallout from GST 2.0 leading to an inverted duty structure, punitive US tariffs impacting exports, and a significant credit crunch.
The consolidation of GST slabs has resulted in an inverted duty structure where raw materials are taxed at a higher rate (18%) than finished goods (5%), leading to working capital being locked up as unutilised input tax credit.
Industry bodies suggest a time-bound and automatic refund mechanism for inverted duty structures, a concessional 8% GST rate for certain products, and refunds for GST paid on plant and machinery purchases by small units.
Punitive US tariffs have significantly reduced sales for export-oriented MSMEs, with some segments experiencing drops of up to 60%, potentially increasing non-performing assets.
Micro enterprises are seeking collateral-free loans up to Rs 1 crore, interest rates capped at 6-7%, automatic renewal of working capital limits, and interest-free loans for import substitution.
There is concern that many QCOs apply to inputs and intermediate goods, disrupting domestic supply chains and exports. It is urged that QCOs be suspended where domestic capacity is inadequate or competitiveness is affected.
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