More incentives for MSMES complying with GST norms

SOPS ARE MEANT TO COMPLEMENT THE DRIVE TO INTEGRATE THE UNORGANISED AND THE FORMAL SECTORS

NEWDELHI: The finance ministry is considering introducing more incentives for micro, small and medium enterprises (MSMES) that comply with the requirements of the new Goods and Services Tax (GST) regime, including access to loans at discounted rates in an attempt to reward early adopters and encourage others to comply.

A senior government official, who spoke on condition of anonymity, said this is one of the ideas being considered in the ministry.

MSMES have been at the forefront of the protests against GST. Many of these enterprises operated in the informal economy and several got away by paying a frac- tion of the taxes they should have. The new tax regime has hit them hard. For instance, MSMES that were suppliers to large companies were clearly told by the latter to comply with the regime. If they didn’t, the larger companies couldn’t claim input tax credit.

The proposed incentives are meant to complement the drive to integrate the cash-driven unorganised sector with the formal sector that has been a major policy focus for the Narendra Modi administration.

Difficulty in accessing credit is a key obstacle MSMES face in doing business, especially as many of them do not have immovable assets to pledge. The sector was adversely affected after last year’s demonetisation move.

GST Council, the federal indirect tax body led by finance minister Arun Jaitley, has been rationalising tax rates and compliance requirements for MSMES considering the employment potential of the sector. CEO Sanjeev Mehta says prices will be slashed across categories following reduction of GST from 28% to 18%.