Lok Sabha Elections 2024: Need for GST reforms to cater MSMEs

The Goods and Services Tax (GST) regime, a pivotal reform in the nation's taxation structure, has evolved over the last seven years. Nonetheless, there still lies some room for tailored adjustments in the GST legislation to accommodate the distinctive circumstances encountered by the industry, specifically the Micro, Small, and Medium Enterprises (MSMEs). Here, it may be pertinent to note that this sector contributes around 30% to the country's GDP, with exports taking up around 46% of the share.

A few propositions outlining the legal reforms aimed at refining the tax administration, which in turn would enhance the ease of doing business, are outlined below:

• The GST registration process should be streamlined to minimize the gestation period. While the UDYAM portal is integrated with the GST portal to extract turnover details, a reverse integration of the GST portal with the MSME portal would offer a seamless registration experience. Additionally, introducing a new taxpayer status such as "Regular – MSME" would delineate MSME-specific compliance obligations alongside enhancing the identification for their customers as well as authorities for better compliance.
• Given that MSMEs often operate on smaller scales compared to larger enterprises, increasing the turnover limits for registration, composition scheme, and Quarterly Return Filing with Monthly Payment (QRMP) scheme would alleviate the compliance burden for MSMEs, thereby allowing them to focus on business growth.
• In addition, GST provisions should be aligned with the Micro, Small, and Medium Enterprises Development (MSMED) Act to ensure timely payments to MSMEs, which would aid in providing them with financial stability. This would entail an amendment to the GST provisions to incorporate a credit period of 45 days as opposed to the present timeline of 180 days.
• Another critical aspect for MSMEs is maintaining adequate cash flow, and GST refund plays a crucial role. An amendment in the law to reduce the time limit for processing refunds from 60 days to align with the general practices of expeditious Income Tax refunds would be beneficial.