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Higher GST rates coupled with delay in payments from big industries putting immense financial pressure on MSMEs: Tamil Nadu industrialist

Updated: Jun 10, 2019 10:16:25am
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Higher GST rates coupled with delay in payments from big industries putting immense financial pressure on MSMEs: Tamil Nadu industrialist

New Delhi, 10 June (KNN) The Micro, Small and Medium Enterprises (MSMEs) in Tamil Nadu want the government to consider lowering the GST rates as higher rates and delayed payments by the big companies put a lot of pressure on the small entrepreneurs.

The industry experts from the state highlighted that more than 50,000 industries have shut down in the last two years due to multiple problems rising due to high tax rates.

Talking to KNN India, Gnanasekaran V, Joint Secretary of Tamil Nadu Small and Tiny Industries Association (TANSTIA) said, “We are the basic manufacturers and stand at primary stage of any industry. Ever since the GST has been enacted, this sector is suffering under high financial crunch. Products that we manufacture are being supplied to Tier 1 and Tier 2 industry which then supply to corporate companies.”

Gnanasekaran has a Manufacturing unit of sheet metal component for Automobiles.

In Tamil Nadu, mainly automobile equipments are manufactured by the small scale steel industries.

‘’In 2018, we gave our memorandum in the office of PM (Prime Minister of India) and FM (Finance Minister) and urged to bring down the GST rates. We even met Finance Secretary and GST Minister regarding this and was assured to look after on this topic,” Gnanasekaran said.

The MSME entrepreneur explained that after implementation of GST, they have to pay 18% GST on purchase of raw products compared to 17.5 before (12% for Central Government and 5% to Tamil Nadu Government). On sale of finished products, 28% GST has to be paid now against 17.5% before its implementation’’.

Gnanasekaran said that Delayed Payment by big companies is another problem putting financial pressure on the credit hit MSMEs.

He said delay in payment is another problem.

“We get our payment from big companies in 90 days after supplying to them. Half money is paid to us by tier1 industry (supplier to corporate companies) in 45 days and corporate pay to tier 1 in another 45 days. After receiving from corporate companies tier 1 pay to us the rest money. Overall, it takes almost 90 days to receive money of one round of supply made. In the mean time we have to pay the monthly salaries to the workers and fulfil other needs of manufacturing unit. Within 28th day of supply, we are bound to pay 28% GST and it becomes a problem for us due to long term delay by other companies,” he stated.

The joint secretary of TANSTIA said that the cost of GST can still be borne by the small scale industries but the GST coupled with delayed payment becomes a serious issue.

Calling for keeping GST rates different for big companies and small companies, Gnanasekaran said, “Increase of 10% in taxes means a lot if counted in terms of investment capital and output. Government should not compare corporate companies from MSMEs. GST rates should be kept different according to the sectors divided. It becomes hard to repay the loan to the lenders and if get delayed for 90 days we are declared as Non-Profit Assets (NPAs). Government should increase the time duration of NPA to 120 days against 90 days. Entrepreneurs cost to be increased by the Government.”

He noted that most of the MSMEs are run in rural areas and give employment to the local and nearby people. Financial crunch is leading in shutting down of industries and unemployment among the people. MNCs don’t offer jobs to the uneducated or partially skilled people but it is the MSME which is giving. (KNN/ VS)

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