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GST will not impact SMEs negatively: Expert

Updated: Aug 05, 2016 09:05:09am

New Delhi, Aug 5 (KNN) The Micro, Small and Medium Enterprises (MSMEs) in the country are in confusion about the implementation of Goods and Services Tax (GST) passed two days back as the rules and regulations have not come out for them.

The general perception is that GST may negatively impact SMEs as aspects like excise exemption will disappear when GST rolls out.

Rajeev Dimri the leader of Indirect Tax at BMR & Associates said that Government’s intention behind GST is to expand the taxpayers base and not to enhance tax burden on business / individual tax payers. 

“Much aligned to this objective, model GST law released by the Ministry of Finance seeks to bring each person with an aggregate turnover of above INR 10 lakhs within the umbrella of GST.  The limit has been kept even lower at INR 5 lakhs for north eastern states.  This should create a level playing field for organized and unorganized sector by curbing scope of various tax evasion practices such as creation of multiple entities to enjoy high exemption thresholds, he said.

However, Dimri said that on the flip side it could vitiate the existing protectionism provided by the government to SMEs which necessitates them to get out of their comfort zone as far as indirect tax costs and benefits are concerned.”

Tax leader explained that the SME manufacturers presently exempt (if annual taxable turnover is up to INR 1.5 Crores) from paying excise duty would be liable to pay full rate of GST.  This may bring their products up for stiff competition with those of industry leaders in terms of tax costs involved. 

Giving his views on small scale service sector, expert said that Small scale service sector is also likely to face an increase in tax rate under GST as against the present effective rate of 15 percent.  However, better availability of input tax credits should leave the increased tax incidence on services to only marginal.  Trading entities, on the other hand, should largely welcome GST as it creates a single uniform market for them across the country with improved ease of doing business.”

He suggested “Irrespective of the bright side of upcoming GST, SMEs must be mindful of its accompanying challenges such as increase in compliance costs and alignment of IT systems with new processes.  Thus, for the SMEs, GST throws a mix bag of opportunities and challenges to explore.” (KNN Bureau)


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