DMPQ:What are the negative effects of GST on MSME?

GST as a reform has a far reaching consequences. MSME sector is going to get benefit in the long run. But in the short run as per CII, the MSME sector is facing following issues:

 

  1. A complicated compliances system and a rigid taxation regime place added limits on the growth potential of small enterprises.
  2. Uncertainty in claiming input tax credit.
  3. Multiple registration and returns.
  4. Transfer of tax liability.
  5. the transference of responsibility and liability of tax remittance to the customers of a supplier.
  6. Reduction in the working capital for MSME.

 

 

The benefits of GST will be lost on Indian industry if it is not accompanied by a set of simple procedures to reduce the compliance burden on businesses, especially MSMEs. The Government must also take sustained initiatives in order to educate MSMEs about the various provisions and compliance requirements under GST for MSMEs through seminars, conferences, training sessions, etc. This will go a long way in enhancing their preparedness for swiftly transitioning to this new tax regime, and avail of its various benefits on the Indian industry.

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