Indian SMEs, 1 year after GST
After an initial bumpy ride, micro, small and medium enterprises, which had faced problems with GST compliance and cash flows, are gradually settling down.
After the initial bumpy ride, micro, small and medium enterprises (MSMEs), who had faced problems with GST compliance and cash flows, are gradually settling down and adapting to the new indirect tax regime, say stakeholders.
According to them, procedures of the Goods and Services Tax (GST) are getting easier and its impact is now being felt in the formalisation of enterprises, a wider tax base and higher tax revenues.
The uncertainty over input tax credit had been a dampener for quite some time for businesses as it has an impact on cash flow, but a proposed simplified return filing system is expected to make the input tax credit flow smoother, they said.
“As for SMEs, it has been a story of overall benefit — which can be ascribed to the wider availability of input tax credit. As GST procedures are getting easier, there is a surge in economic demand. Initially, SMEs faced problems with GST compliance and had to make certain modifications in their systems,” Jagi Mangat Panda, CII Eastern Region’s chairperson, founder and managing director, Ortel Communications, told IANS.
A number of small taxpayers have opted for composition registration wherein they have opted to pay tax at a specified percentage of their turnover.
“Billing on GST and movement of stock were the early worries. Once these settled, there was the requirement of filing three returns a month, which was stressful,” Tejas Goenka, executive director at the business software provider and qualified GSP (GST Suvidha Provider), Tally Solutions, told IANS.
According to taxpayers, continuous monitoring of their monthly transactions to ensure that there is no activity which has escaped the ambit of compliance has been a matter of concern.
“As time passed, things eased for them with a more convenient return filing mandate every month. As it stands, things seem to have settled
on the ground and after the initial bumpy ride, businesses are beginning to see the benefits of GST and thriving under it,” Goenka said.
The major challenge has been in respect of filing of complex returns and the GST portal-related technical issues.
With the deferment of GSTR 2 and the planning of a new return filing model, things are a lot better. “But a number of businesses in the unorganised sector have problems revamping their technological structure to capture all activities, which are to be reported in the GST return,” Panda said.
Moreover, there was a problem of incorrect and incomplete data uploaded by the SME segment originally in the returns.
“The awareness regarding the process of correction has been lacking. The government has tried to clarify such matters with a relevant circular,” said Shubham Khaitan, partner, S. Khaitan & Associates.
“The lack of a timely disposal of refunds has impacted the cash flow for exporters of both goods and service. SME segment exporters have been affected due to the blockage of working capital. Matching of input tax credit between GSTR 2A and GSTR 3B is a hurdle too,” Khaitan said.
“However, over the last few months, the government has taken cognisance of the concern related to input tax credit. We are hoping that the proposed simplified return filing system is implemented at the earliest. Under this system, input tax credit is made available to the buyer on accepting the invoices uploaded by the supplier,” Tally Solutions’ Goenka said.
This along with a single return a month will greatly ease the compliance burden on SMEs, he said.
After almost a year of implementation of GST, a number of small businesses which were not used to paying taxes earlier are now covered under the ambit of GST.
“As a result, the smaller segment, which is getting more organised, is benefiting with the greater input tax credit availability, notwithstanding some issues regarding compliance-related complexities,” Panda added.