6 years of GST: 88% MSMEs see reduced cost of goods and services, says Deloitte survey

June 20, 2023 

Ease of doing business for MSMEs: The Goods and Services Tax (GST) introduced in India in July 2017 as a major reform to simplify and unify the country’s tax system has had a significant impact on the Indian economy with 88 per cent of MSMEs reporting a reduction in goods and services costs along with optimised supply chains, a Deloitte survey said on Tuesday.

Collating 612 responses (including large enterprises and MSMEs) from six industries to comprehend India Inc’s views on the integration of GST against the ease of doing business in India, tax technology, investment-centric growth, taxpayer profiling, and recommendations, the survey said MSMEs attributed the reduced goods and services costs to improved uniformity in the GST regime.

Among measures introduced under GST such as increasing the threshold limit for registration under GST from Rs 20 lakh to Rs 40 lakh has been beneficial for MSMEs, according to 74 per cent of MSME respondents in the survey. Similarly, 73 per cent said relaxation of threshold and reduction of restrictions for availing the composition scheme benefited them while 55 per cent noted invoice financing solutions launched by various providers based on invoices reported under GST to be beneficial. 46 per cent also highlighted the offline option provided for raising e-invoices without any cost incurred on technology benefiting MSMEs.

“India Inc. is very positive towards the changes facilitated by the GST regime and the increasing supply-chain efficiencies. India Inc. continues to look forward to the continued promotion of EoDB reforms, working capital rationalisation, and reductions in input tax restrictions. The 22 per cent YoY growth in GST revenue is testimony to the overall economic development and tax-payer-centric administration. The survey indicates a positive impact on businesses of all sizes with Micro, Small and Medium Enterprises (MSMEs) being the biggest beneficiary of the simplified tax regime,” said Mahesh Jaising, Partner and Leader, Indirect Tax, Deloitte India.

Among other key MSME findings from the survey were:

1. 16 per cent of MSMEs noted that the introduction of GSTR-2B (auto-generated input tax credit statement) has resulted in better vendor account management, thereby increasing seamless credit flow
2. 88 per cent of MSMEs said the transfer of CGST/IGST cash ledger balance between “distinct persons” has reduced working capital blockage for businesses
3. More than 70 per cent of MSMEs prefer changes such as the allowance of ITC refunds on capital goods and removal of deemed supplies being taxable
4. 64 per cent of MSMEs said eligibility to avail ITC based on receipt of invoice and relaxation on matching requirements would provide further growth impetus
5. More than 70 per cent of MSMEs cited export rule liberalisation under the GST law as the most needed impetus followed by unlocking working capital measures such as cross-distinct person utilisation of CGST credit balances
6. More than 50 per cent of MSMEs sought removing restrictions of input tax credits such as in relation to employees and set up of commercial infrastructure along with rationalising GST rates for the entire supply chain

[The Financial Express]