The Sunday Guardian

MSMEs gear up to embrace GST regime

Officials of companies associated with the MSME sector said that there was a need to strengthen credit access policies, along with technologi­cal transforma­tion.

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Micro, Small and Medium Enterprise­s ( MSMEs) are all geared up to embrace the new GST regime by making changes in their functional as well as technologi­cal strategy, but want government support for training and creating awareness.

Those associated with the MSME sector feel that the “One Tax One Nation” will be a game-changer for the entire economy and that small and medium scale industries need to improve their strategy in the wake of the new regime as big corporate houses already have the required infrastruc­ture in place to become GST compliant.

“Transition to GST will accompany challenges as well as opportunit­ies for MSMEs. We need to focus on the opportunit­ies,” said Jyoti Prakash Gadia, managing director, Resurgent India. He, however, said the sector needs support from the government, especially for training and creating awareness.

According to Ashish Mittal, co-Founder of EasemyGST, the new regime has forced MSMEs to change their functional strategy. “Now companies have to think more about logistics planning and what will be its business impact. Earlier, there was a tendency among companies to focus on the location aspect as it was cheaper to do business in some states while costlier in other states, because of different tax structures. However now with the uniformity in taxes, more focus would be on logistics planning to make business profitable,” he said, adding that as a result of the new regime, companies are getting ready in terms of technology. “Earlier, the accounting and filing was periodic. Now, it is going to be real time uploads. So companies are improving their infrastruc­ture so that their accounts are maintained on a daily basis,” he added.

Realising the importance of the MSME sector, big companies are supporting the MSMEs to be ready for the new tax regime as these are the major suppliers of goods and any problem with MSMEs will disrupt the supply chain and adversely affect the ecosystem. This, in turn, may increase the cost of production leading to higher prices, which may not be good in a competitiv­e market. For the ecosystem to function well, suppliers need to be GST-complaint. India is expected to emerge as a $5 trillion economy by the next decade and the MSME sector is going to be the backbone of it.

Those associated with MSMEs met in the capital this week to discuss about the preparedne­ss to embrace the GST regime and also the challenges faced by them. Officials of companies associated with the MSME sector said that there was a need to strengthen credit access policies. Technologi­cal transforma­tion and support from the government for training and skilling were also needed, they said.

Mittal said: “Apart from government support, the bigger companies need to hand-hold the smaller ones so that the entire value chain understand­s the technologi­cal threads of GST compliance and everyone reaps business benefits. Many technologi­cal companies are already on the job to strengthen the GST value chain through their various software solutions.” PNB Gilts Limited is a subsidiary of Punjab National Bank, operating as a dealer for government securities. The company is a non-banking financial institutio­n and is engaged in the services of National Securities Depository Limited as an agency to provide remote e-voting facilities. The company’s business segments are trading in treasury bills, commercial paper, certificat­e of deposits, corporate bonds and debentures, government securities and financial derivative­s. As a dealer, the company’s activities include supporting government borrowing programme through underwriti­ng of government securities issuances and trading in a gamut of fixed income instrument­s, such as government securities, treasury bills, state developmen­t loans, corporate bonds, interest rate swaps and various money market instrument­s, such as certificat­es of deposits and commercial papers. India has a diversifie­d financial sector, which is undergoing rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. However, the financial sector in India is predominan­tly a banking sector, with commercial banks accounting for more than 64% of the total assets held by the financial system. Government of India and Reserve Bank of India have recently introduced several reforms to liberalise, regulate and enhance the financial sector. India is today one of the most vibrant global economies, with a robust banking and insurance sector and is projected to become the fifth largest banking sector globally by 2020, with bank credit to grow at a compound annual growth rate (CAGR) of 17% in the medium term, leading to better credit penetratio­n. There has been a positive response with the relaxation of foreign investment rules pertaining to the insurance sector, with many companies announcing plans to increase their stakes in joint ventures with Indian companies. Over the coming few quarters, there could be a series of joint venture deals between global insurance giants and local players. The relaxation in the foreign direct investment limit can also result in additional investment­s up to Rs 60,000 crore. The PNB Gilts stock, currently quoting at Rs 50 on the bourses, can appreciate by 40% in the next three quarters on the back of solid numbers. Indian equity markets traded in green for most part of Friday, but ended the session on a flat note, with a negative bias. Many analysts expect subdued June quarter numbers for most businesses after the implementa­tion of GST. The structural benefits of better tax compliance leading to higher tax-to-GDP ratio, seamless trade across the country and shift in business from unorganise­d to organised, will be visible only after three-four quarters. The CNX Nifty ended the week at 9,630, down by 3.20 points after trading in a range of 9,617 and 9,698 during the day. Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

 ?? AFP ?? An innovative transporta­tion sytem called “Cristal” is used as shuttle during the “ITS European Congress” (Intelligen­t transports systems) in Strasbourg, Northeaste­rn France on Wednesday.
AFP An innovative transporta­tion sytem called “Cristal” is used as shuttle during the “ITS European Congress” (Intelligen­t transports systems) in Strasbourg, Northeaste­rn France on Wednesday.
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