India SME Forum writes to GST Council seeking concessions for the MSME sector

India SME Forum writes to GST Council seeking concessions for the MSME sector


Nirmala Sitharaman, India SME Forum, GST Council, MSME, input Tax Credit, Goods and Services Tax, Covid19 pandemic, Covid19, pandemic, Sushma Morthania, Director General, India SME Forum, Sushma Morthania Director General, Sushma Morthania India SME Forum, CGST Act

Ease of Doing Business for MSMEs: India SME Forum, an industry body for MSMEs, has recently sent a representation to the Goods and Services Tax (GST) council recommending ways to sustain and revive the sector that is currently under tremendous stress due to the massive second wave of Covid19 pandemic.

The representation suggested allowing of Input Tax Credit (ITC) to be converted into tradable instruments (secured) to unlock capital. “ITC is an industry-wide concern especially for MSMEs that are operating on low capital margins and particularly for those sectors where inverted GST structure is present,” Sushma Morthania, Co-Founder & Director General, India SME Forum said in the letter to Union finance minister Nirmala Sitharaman.

It further proposed that MSMEs that sell online be allowed to be present in multiple states without having Principal Place of Business (PPOB) in all the states. They could be required to have PPoB registration in their home state only.

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“At present, an MSME wishing to sell online is mandated to obtain GST registrations (PPoB) for every state where it wishes to conduct business. However, there has been a delay in availing GST registration which is stalling onboarding of MSMEs on e-commerce platforms. Apart from application errors, prominent reasons for delay in availing GST registration are ‘physical visit-business not present’ and ‘trade licence/professional tax certificate not present’,” the letter stated.

Concession from physical verification (of the place of business via a physical visit to Aadhaar verification centre and/or site visit of the place of business) for getting GST registration was also sought.

It further asked for refund of inverted duty structure to be extended to input services. Currently, as per the CGST Act, one of the instances when refund can be claimed include when the GST paid on inputs is higher than the GST on outward supplies. A situation referred to as a case of inverted duty structure.

However, the Section 53(3) (ii) of the CGST Act categorically covers a situation where the inverted duty structure is due to a higher rate of GST on inputs. However, there is no specific mention of higher rate of GST on input services.

To illustrate, an MSME engaged in the sale of apparel which attracts GST at 5% and 12%, incurs GST at 18% on input services, such as logistics, warehousing, marketing, etc. will be in a perennial excess GST credit situation with no refund being possible.

“There cannot be differential treatment vis-à-vis input services and input, as inverted duty on account of both add to the cost of doing business,” said Morthania.

Other recommendations included extension of due date of GST Returns and waiver on late fees and interest and reduction of the GST rates on the Covid-related items such as oxygen concentrators, O2 cylinders, Oxymeters to make them affordable and accessible to all.

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