A study on impact of GST on the Indian MSME sector

This paper aims to address the overview, concept of on MSME sector in India and impact of new indirect tax regime GST. The Indian MSME sector is critical for the growth and development of the nation. The contribution of Indian MSMEs to the national output, employment generation, exports and industrial output is enormous. But a complicated compliances system and a rigid taxation regime place added limits on the growth potential of these enterprises. The Indian MSME sector will gain tremendously form the GST and the implementation of this taxation regime has been a recurring policy recommendation by various stakeholders engaged in initiatives for the amelioration of the MSME sector in India. GST has the potential to increase tax compliance amongst MSMEs in India, significantly reduce their input cost and cultivate financial discipline among MSMEs, leading to an increase in revenue collection for the government and a simplified tax regime for these enterprises. But there are also some areas of concern for MSMEs relating to the GST law. The biggest one which has the capability to derail the process of a robust tax regime being Input Tax Credit and availing it, the transference of responsibility and liability of tax remittance to the customer in the event of failure of supplier in meeting the compliance requirement, etc. There are other issues around payment of GST on advances, taxing free supplies, complications around sales returns etc. A careful analysis of the impact of GST on various nosiness processes as well as a studied examination of the various underlying features and concepts will be crucial to enhance the preparedness of Indian industry, especially the Indian MSME to adapt to this new indirect tax regime touted as a path breaking step in the area of taxation reforms in the country.