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  • Modi gives glimmer of hope to MSMEs

    Nov 6th, 2017

    As prime minister Narendra Modi has hinted at more GST relief measures for traders and businesses, hope is running high for small and medium enterprises (SMEs) ahead of the GST Council meeting on November 9-10 in Guwahati. SMEs expect the government to reduce the tax rate for various capital goods to 12 per cent from 28 per cent, make return-filing quarterly for all and de-link input credit from suppliers’ tax payments.

    The SME sector has also made a strong pitch for reviewing multiple GST slabs and reduce them to a maximum of three.“The number of slabs should be limited to ideally a maximum of three. The lowest slab (should be) covering essential goods and highest slab on sin-goods/luxury goods. Rest all items should be in the mean or revenue neutral rate,” Federation of Indian Micro and Small & Medium Enterprises (FISME) has written to the group of ministers (GoM). Stating that micro, small and medium enterprises (MSMEs) are hugely burdened in the GST regime in which they cannot avail of the credit even when they have paid full tax on their purchases, the industry body has sought de-linking of input credit from payment of GST by suppliers. It has noted that MSMEs work on low margins and the current dispensation is bleeding them with burden akin to double taxation.

    “Delinking of returns with suppliers is very essential as it is going to create a lot of problems. When your supplier supplies you and he does not file his return or does not include your invoice in his return, then your return is held up,” said Bharat Garg, managing director, JK Metal Industries.He further said making filing of return quarterly for some while monthly for some others is set to create problems. “If I buy inputs from someone who files his return quarterly, it is going to stop me from claiming my refund. Until my supplier files his returns, I am not going to get my refund. For the SME sector, capital is very important as it operates on a very thin margin. We are already short of capital and so any blockage of refund would create problems,” Garg stated.

    Modi has signalled more changes in the GST rules to strengthen the business and economy. While he did not reveal the specific relief measures on the cards, industry watchers hope provisions would be relaxed for traders given the difficulties faced by them. With Gujarat polls just weeks away, the government could be generous in providing relief to small businesses, a core constituency of the ruling BJP.