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GST to Help Indian MSMEs in Competing with China: Industry Body

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With the Goods and services tax (GST) comes into effect from 1 July, the micro, small and medium enterprises (MSMEs) would be able to compete with foreign competition coming from cheap cost centers such as China, Philippines, and Bangladesh, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) said.

“From an MSME perspective, GST will bring many positives compared to the current systems such as easy process of availing input credit, single point tax, elimination of cascading tax system, and simpler taxation,” according to the ASSOCHAM and Ashvin Parekh Advisory Services (APAS) joint study titled Emerging Mantras for Bankers-Borrowers.

With the GST designed to increase the taxpayer base and bring more MSMEs into its scope, it would put some burden of compliance and associated costs to them, ASSOCHAM said.

“But eventually, it will turn these MSMEs more competitive with a level playing field between large enterprises and them,” it added.

The study listed the negative implications of the GST for MSMEs as being the lower threshold, no tax differentiation for luxury items and services, increase in product cost, selective tax levying, and higher tax rate for service provider.

Among other negatives it listed excess working capital requirement, realignment of purchase and supply chain, dual control, high compliance burden and tax on advances, tax under reverse charge for un-registered purchases, tax on stock transfers and deemed supplies, time limit for return of goods sent on sale or return basis, condition of payment and filing of return for availing input tax credit, and power of arrest and prosecution.

Highlighting the positives for the sector such as a unified market and lower logistical costs, the report said considering that all compliance procedures will now only be online, MSMEs need not worry about interacting with department officers for carrying out these compliances, “which was earlier a cumbersome task.”

“Furthermore, Indian MSMEs would be able to compete with foreign competition coming from cheap cost centers such as China, Philippines, and Bangladesh.”

Toys, low-priced electronics, computer components, crockery, mobile accessories, lightings, stationary, plastic wares, building material (floorings, wallpapers) and ceramics are some of the cheap Chinese imports coming and selling across the country.

“The GST regime will usher in lower taxes, seamless input tax credit, logistics savings and market share swings from unorganized to organised players,” the statement added.

Meanwhile, British professional services firm Ernst and Young’s (EY) India arm said on Sunday that it has launched the “EY GST Helpdesk” free facility for small businesses, traders and entrepreneurs.

“The business community can post their GST related query on EY India Tax Insights App, DigiGST website – and EY_India on Twitter,” a release in New Delhi said.

“EY GST Helpdesk is driven by the largest pool of indirect tax professionals powered by over 800 GST practitioners across 14 cities,” it added.

SMEStreet Desk

SMEStreet is fast growing platform dedicated to entrepreneurs from small and medium sized businesses (SMEs). Committed to facilitate Knowledge & Networking for Business Growth, SMEStreet offers value added content which shows the actual voice of Indian MSMEs.

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