Even as MSMEs have been critical of the government's Goods and Services (GST) tax on multiple occasions since its launch in 2017, the MSME ministry said it hasn't come across any information related to the negative impact of the tax system. "No such information has been received by this ministry," minister of state for MSMEs Bhanu Pratap Singh Verma informed the Lok Sabha on Thursday in a written reply to a question about whether the MSME sector has been affected badly due to GST.
Verma, however, shared "numerous measures in respect of GST" taken by the government to encourage MSMEs such as first, no requirement of GSTIN on the Udyam Registration Portal up to the ceiling of Rs 40 lakh turnover; second, no registration required for the inter-state and intra-state supply of services up to Rs 20 lakhs in a year; third, no registration required for the intra-state supply of goods up to Rs 40 lakh in a year, etc.
However, associations have noted that they share MSMEs' concerns and suggestions related to GST during meetings with the ministry.
"Over 25 per cent of MSMEs have been shut so far due to GST and demonetisation. Various industry associations including us do make formal representations to the MSME ministry, but they are probably not considered sincerely. The government's response to associations' letters is often very poor or very selective," Vijay Kalantri, President, All India Association of Industries (AIAI) and Chairman, MVIRDC World Trade Center, Mumbai told FE Aspire.
Rajiv Chawla, Chairman of the MSME association IamSMEofIndia also said that various associations make suggestions to the MSME ministry on various issues from time to time including GST during meetings after which a formal memorandum is shared with the ministry.
"In fact, the government has given various relief measures on GST based on the feedback from the MSME ministry which gets conveyed to the finance ministry. Unless there is a unique mechanism for the MSME ministry to receive such information, for me every representation is formal representation to the ministry," he added.
Also read: Trade bodies expect GST rationalisation, easier bank credit and increase in public expenditure in the upcoming union budget
Among some of the GST-related reliefs given by the government have been raising the exemption threshold to Rs 40 lakh from earlier Rs 20 lakh, giving late fee waiver for filing returns and reducing interest rates for late payments, allowing e-commerce sellers with turnover up to Rs 40 lakh but not registered with GST to make the intra-state supply of goods via e-commerce, and more.
Importantly, an August 2018 study by the Reserve Bank of India (RBI) noted that the introduction of GST led to an increase in compliance costs and other operating costs for MSMEs as most of them were brought into the tax net. Also, a study by SIDBI indicated that post-demonetisation and post-GST introduction, the relative credit exposure initially declined for most MSMEs but had recovered fully by March 2018. Hence, these issues are less significant now.
"These challenges were more transitional in nature when the GST was launched but they are settled now. On the other hand, the information shared in budget recommendations is addressed to the finance ministry instead of the MSME ministry. So probably in the past few months, there were no representations made directly to the MSME ministry on issues including GST. With respect to CII, no formal representation on GST's impact on MSMEs at least in the last one year has been sent to the MSME ministry," Ashok Saigal, MD, Frontier Technologies and Co-chairman, CII National MSME Council told FE Aspire.
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