A casual discourse about the direction of the Indian economy would always include within its purview the burgeoning rise of MNCs. The MSMEs have never been the cynosure of all eyes; they’ve always been underestimated in their value and contributions.
However, data from the MSME ministry suggests that India has over 6.3 crore micro, small and medium enterprises (MSMEs), which generate roughly 29 per cent of the country’s gross domestic product (GDP) through domestic and foreign trade.
MSMEs ARE BACKBONE OF INDIAN ECONOMY
Unquestionably, MSMEs are the backbone of the Indian economy, and therefore, the need to assist them to operate seamlessly is important. Its significance and impact on the Indian economy are often taken for granted.
Considering the volume of individuals involved in small enterprises and the potential for employment, the government is aiding them in their endeavors and trying to create an environment for their unfettered operability through various steps.
ADOPTION OF GST
The MSME sector has mostly been credit-starved, with smaller units rendering it economically inefficient. The Covid-19 pandemic has wreaked havoc on this industry. Many people have lost their jobs and are unable to restart their businesses due to a lack of funds. Despite the quick adoption of the Goods and Services Tax (GST), many units in the MSME sector remain untaxed. Policymakers struggle to come up with appropriate policy reforms due to a lack of intelligent data.
Small and Midsize Businesses (SMBs) are having a hard time understanding and adopting the new rules for indirect taxation. Businesses are worried about filing three returns in a month, complicated registration rules, and complicated refund rules, all of which they have to follow.
While the digitalization of SMBs is unavoidable, cumbersome GST regulations may slow the rate of digitization. The GST compliance process must be completed only via the online site. Small and medium-sized businesses often find it more difficult because compliance costs have gone up, and many people don’t know about the most recent technologies, so it can be hard for them to keep up.
SMBs are hesitant to register under the GST statute, not to evade taxes, but to avoid the time-consuming and inconvenient registration and return filing processes. This deters MSMEs from exploring online marketplaces, slowing India’s aim of becoming a digitally driven economy.
That there should be a balance between online and offline retailers by eliminating the GST registration requirement for modest merchants who sell online and have a revenue of less than Rs 40 lakh.
According to Nasscom, such sellers should be able to take advantage of the composition scheme, whereby smaller businesses and merchants can authenticate warehouses of e-commerce operators across states based on a single physical place of business registration in the seller’s home state. These proposals are pertinent to the problems being faced, and if embraced, they would help Indian SMBs expand.
The growth of a digitized economy would not be feasible without the engagement of MSMEs. Considering ecommerce has the potential to change smaller businesses via the use of technology, the government should take measures to minimize any compliance-related impediments. Many MSME accomplishments have already surfaced in the nation as a result of their engagement in the e-commerce sector.
As a consequence, perplexing tax regulations should be eliminated in order to stimulate growth in this crucial sector. While the government has made it easier for businesses to connect to the GST infrastructure through APIs in order to speed things up, it is very difficult for small businesses to use these because they don’t have a lot of technical knowledge and most tools and solutions are too expensive for them to use.
(The article is written by Rahul Meena, Founder and CEO, Treflo)