• The group of state finance ministers headed by MoS Finance Mr. Shiv Pratap Shukla will help provide speedy solutions to the problems faced by the MSMEs: Rashesh Shah, President, FICCI
NEW DELHI, 7 August 2018 : FICCI welcomes the initiative taken by the GST council to specifically discuss the issues and concerns being faced by MSMEs.
“The decision of the GST council to set up a group of ministers comprising Finance Ministers of Bihar, Assam, Delhi, Punjab, and Kerala under the chairmanship of Minister of State for Finance Mr. Shiv Pratap Shukla will help in addressing the problems faced by the MSMEs,” said Mr. Rashesh Shah, President, FICCI.
Mr. Shah added, “the emphasis of the GST council on the fitment committee providing solutions with regard to the rate changes required, along with the pilot project for providing cash back facility to promote digital Payments, are also steps that will benefit MSMEs”.
The Micro, Small & Medium Enterprises (MSMEs) play a vital role in the economic and social development of the country, often acting as a nursery of entrepreneurship. They also play a key role in the development of the economy with their effective, efficient, flexible and innovative entrepreneurial spirit.
“FICCI is confident that the committee will address the issues and will help provide speedy solutions to the problems faced by the MSMEs,” said Mr. Shah.
Some of the recommendations submitted by FICCI with regard to the MSMEs to the GST council are :
1. Allow Single Pan-India registration
The GST law mandates registrations to be obtained in every State/Union Territories from where the supply of goods or service is made, despite the taxable person providing the supplies under a single legal entity. Multiple registrations only warrant additional compliances and assessment without increasing tax revenue to the Government exchequer. A single registration will mitigate the uncertainty, cascading and unnecessary compliances. It is imperative that a single registration be allowed for MSMEs with a credit mechanism that ensures that there are no credit blockages.
2. Simplify the procedure for exports, including refund procedure
- (A) It has been observed by the taxpayers in the MSME sector that the requirement of letter of Undertaking poses additional compliance for them in terms of time and resources involved without serving any purpose for the department, especially when all the details of the exporter are already available with the revenue department in the form of PAN, Import Export Code. It is recommended that the requirement to submit LUT by the small exporters may be dispensed with. This would ease the compliance burden for MSMEs and encourage exports.
- (B) The GST regime was meant to be a digitalized system; however, department authorities still insist that separate hard copies are also provided to claim refund. This defeats the purpose of digitalizing process. The time involved by the MSMEs in finally getting the refund sanctioned causes a tremendous strain on the cash flows of the MSMEs, which in turn restricts the possibility of increasing exports.
- Expedite Refunds on account of accumulated input tax credit
It has been observed that there are considerable delays in processing of refund in case the tax on inputs is higher than tax on the output supply. It is recommended that considerable time and effort should be put in by the Government to clear such pending refunds. This is an important area of concerns for MSMEs and needs to be looked into.
- Specify threshold for applicability of reverse charge under section 9(3)
As per section 9(3) of the CGST Act, 2017, the service recipients are required to pay GST on the expenses notified under section 9(3) of the CGST Act, 2017 like payments to advocates, goods transport operator, etc. There are certain compliances required in this case, viz. issue of self-invoices, payment vouchers, maintaining the relevant general ledger etc. This creates an unnecessary compliance burden for the service recipient. It is recommended that the exemption from paying GST under reverse charge should be provided up to a certain threshold of expenditure. This would reduce the compliance burden for MSMEs without much revenue loss for the Government.
- Non-levy of GST on Advance on Services
As per notification no. 40/2017-Central Tax dated, 13 October 2017 – requirement of payment of GST on advance receipts towards the supply of goods was removed for persons having a turnover of less than 1.5 crores in a year. Further to this, Vide Notification no. 66/2017- Central Tax dated 15 November 2017, this relaxation has been extended to all taxpayers from payment of tax on advances received in case of supply of goods, except persons opting to pay GST under the composition scheme. To facilitate the interests of the service providers, it is suggested that the requirement of payment of GST on receipt of advance on services should also be removed, in case of supply of services.
- GST Rates – ‘Breakfast Cereals’ (Chapter Heading 1904)
Breakfast Cereals are popular, nutritious and ready to eat food products, essentially made from familiar and staple grains like Corn, Maize, Wheat, Ragi, Rice and Barley and also fortified with a range of Vitamins and Minerals depending on consumer needs and regulatory requirements. It is requested that rate of GST applicable to Breakfast Cereals be reduced from current 18% to 12% as it will drive penetration of this nutritious food product to a great extent.