IMPACT OF GST ON SMALL AND MEDIUM

ENTERPRISES

A Project Submitted to
University of Mumbai for partial completion of
the degree of Master in Commerce
Under the Faculty of Commerce

BY
SANDEEP OMPRAKASH GUJAR

Under the Guidance of

MR. VISHAL RAJAK
Matru Ami, Joshibaug , Kalyan, Maharashtra 421301
2021-2022
IMPACT OF GST ON SMALL AND MEDIUM
ENTERPRISES

A Project Submitted to
University of Mumbai for partial completion of
the degree of Master in Commerce
Under the Faculty of Commerce

BY
SANDEEP OMPRAKASH GUJAR

Under the Guidance of

MR. VISHAL RAJAK
Matru Ami, Joshibaug , Kalyan, Maharashtra 421301
2021-2022
 ACHIEVERS COLLEGE OF COMMERCE AND
MANAGEMENT
Matru Ami, Joshibaug, Kalyan, Maharashtra 421301

CERTIFICATE

This is to certify that Ms./ Mr. has worked and duly completed her/his Project
Work for the degree of Master in Commerce under the Faculty of Commerce in
the subject of ADVANCED ACCOUNTING and her/his project is entitled,
“IMPACT OF GST ON SMALL AND MEDIUM ENTERPRISES ” under my
supervision. I further certify that the entire work has been done by the learner
under my guidance and that no part of it has been submitted previously for any
Degree or Diploma of any University.
It is her/ his own work and facts reported by her/his personal findings and
investigations.

MR. VISHAL RAJAK

Date of submission:
29/05/2022
 DECLARATION BY LEARNER
I the undersigned Miss / Mr. SANDEEP OMPRAKASH GUJAR here by, declare
that the work embodied in this project work titled “IMPACT OF GST ON SMALL
AND MEDIUM ENTERPRISES”, forms my own contribution to the research work
carried out under the guidance of MR. VISHAL RAJAK is a result of my own
research work and has not been previously submitted to any other University for
any other Degree/ Diploma to this or any other University. Wherever reference
has been made to previous works of others, it has been clearly indicated as such
and included in the bibliography. I, here by further declare that all information of
this document has been obtained and presented in accordance with academic rules
and ethical conduct.

SANDEEP OMPRAKASH GUJAR.

SANDEEP

Certified by
MR. VISHAL RAJKAK
 ACKNOWLEDGMENT

To list who all have helped me is difficult because they are so numerous and the
depth is so enormous.
I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance
to do this project.
I would like to thank my Principal, MS.SOPHIA AUGUSTINE D’SOUZA for
providing the necessary facilities required for completion of this project.
I take this opportunity to thank our Coordinator MRS. MADHURI MURBADE, for
her moral support and guidance.
I would also like to express my sincere gratitude towards my project guide MR
VISHAL RAJAK whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference
books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my Parents and Peers who
supported me throughout my project.
 INDEX
SR N0 NAME OF THE CHAPTER PAGE NO.

1 CHAPTER 01- INTRODUCTION

 Abstract 1
 Introduction 2-3
 Historical Background Of Impact Of GST On Small And 4-9
Medium Enterprises
 Definition Of Impact Of GST On Small And Medium 10-12
Enterprises
 Statement Of The Problem 13
 Significance Of The Problem 13

2 CHAPTER 02- RESEARCH METHODOLOGY

 Objectives 14
 Significance Of The Study 14
 Research Method 14
 Need For The Study 14
 Data Analysis 15
 Limitations Of The Study 15
 Challenges For SMES 15
 Research Methodology 16-17
 Hypothesis 17

3 CHAPTER 03- LITERATURE REVIEW 18-23

4 CHAPTER 04 - DATA ANALYSIS, INTERPRETATION AND

PRESENTATION
 Results 24
 Discussion 24-26
 Opportunities And Challenges For SME’S 26
 Introduction To MSME 27
 Goods And Services Tax (GST) 28
 Micro, Small And Medium Enterprises Development 29-31
 Recent Policy Initiatives Of MSME’S 32-33
 Overview Of Performance Of The MSME Sector 34-71
 Positive Impact Of GST 72-73
 Negative Impact Of GST 74-77

5 CHAPTER- 05- SUGGESTIONS AND CONCLUSION

 Findings Of The Study 78
 Suggestions 79-80
 Summary, Conclusions And Policy Implications 81-82
 Conclusion 83

 References 84
NAME: SANDEEP OMPRAKASH GUJAR

ROLL NO. : 15

CLASS: M.COM PART 2 (ADVANCED ACCOUNTING)

SEMESTER: 4TH

PROJECT TOPIC: IMPACT OF GST ON SMALL AND MEDIUM

ENTERPRISES

EXAN SEAT NO. :

DATE: 29/05/2022
IMPACT OF GST ON SMALL AND MEDIUM ENTERPRISES

CHAPTER NO. 1: INTRODUCTION

 ABSTRACT:

The introduction of Goods and Service Tax on 1st July, 2017 has revamped the tax structure
and carved out a new path for the Indian economy. The new tax regime was envisioned to be
free of all the problems of the previous tax system but, however since its proposal it has
received mixed reviews from industries, academia and others. With extensive changes aimed
at One Nation One Tax, it has left massive impact on the Small Scale Industries too. Hence this
paper critically analyses the impact of Goods and Service Tax (GST) on Small Scale Industries
specifically in Karnataka. Existing literature says that GST shall reduce the cost of doing
business, increases transparency, decreases prices of product, increase tax compliance and
improve ease of doing business. This paper proves some of these assertions through a primary
data research and further identifies the need of reforms with respect to separation of definition
of job work and labour work, penalties for non-payment of GST, dual administration and issues
pending from the previous tax regime. It has also clearly established that composition scheme
has been a non-performer and the reverse charge mechanism must be re-introduced later or
revamped to balance its costs and benefits. Thus the study has implications for policy makers,
industries and academia and also provides a better understanding of the new tax system itself.

1
  INTRODUCTION

The introduction of Goods and Services Tax (GST) has been heralded as a land mark in the
history of Indian tax system. In 2014, One Hundred and Twenty Second Constitutional
Amendment Bill was introduced in Lok Sabha and this led to the enactment of the One Hundred
and First Constitutional Amendment in August 2016 to include GST in the constitution.
(Bangar & Bangar, 2017). From 1 July 2017, GST came into existence.
All the Central and State taxes like the excise duty, service tax, entertainment tax, luxury tax,
purchase tax, surcharges and cesses were subsumed under GST. Currently GST is levied on
every product except petroleum, alcohol, tobacco and stamp duty on real estate in four slabs of
5, 12, 18 and 28 per cent. Most of the daily use articles have zero GST.
GST is a single and an indirect system of taxation that is levied on 'supply' of goods and services
or both (it includes sale, transfer, barter, exchange, license, rentals, lease or disposal made or
agreed to be made for a consideration by a person in the course of business) except alcoholic
liquor for human consumption, right from the manufacturer to the consumer. (Bangar &
Bangar, 2017) Under GST, only value addition will be taxed and burden of tax is to be borne
by the consumer. Moreover credit of taxes paid at the previous stages is available as set-off.
Further GST is a consumption based tax i.e. the tax would accrue to the taxing authority which
has jurisdiction over the place of consumption which is also termed as the place of supply
(Bangar & Bangar, 2017).
In India the system of GST is unique as there exists a dual GST. Central Goods and Service
Tax (CGST) and State or Union Territory Goods and Service Tax (SGSTI UTGST) is levied
simultaneously for supplies within State or Union Territory and is payable to Central
government and State government or Union Territory respectively. The Integrated Goods and
Service Tax (GST) is applicable for interstate supplies and is payable to Central government.
Further imports are liable to IGST in addition to custom duties while exports are zero rated.
Also certain goods like petroleum products and electricity are exempted to be taxed at a later
stage.
Though GST seems to be very similar to the previous Value Added Tax System, there are
certain unique characteristics like GST being a consumption based pan-India tax system (tax
rates are uniform throughout the country). Hence a number of advantages or benefits were
envisaged as an implication of GST. Reduction in tax incidence was acclaimed as the biggest
advantage of GST for consumers. For traders, the system of input credit has been a significant
provision as it helped them to pass on lower tax to the customers and also reduce overall costing
(Anonymous, 2019). Apart from this, GST has also led to the formation of common national
market, increased ease of doing business for industries, benefits to small taxpayers, a self-
regulating, transparent tax system, complete digitalisation of tax collection, assessment and
audit through the GST network (GSTN), and reduction in multiplicity of taxes.
It has been two years now since the implementation of GST and all that the government has to
tell about the yearly assessment is that GST revenue has been high and even more than
estimated. But now reports show that revenue collections have been falling. In 2018-19 Budget,
the GST collection was estimated at Rs 7.4 lakh crore which was revised later in 2019-20
interim budget to Rs 6.4 lakh crore. But the finance ministry's figures show that the actual GST

2
collection for 2018-19 was around Rs 5.8 lakh crore, a significant shortfall of over 20 per cent
compared to budget projection (Anonymous, 2019). However it's only close to two years since
the implementation of GST and hence it is very early to objectively analyse the impact of the
implementation of GST but, the question about whether the economy is headed in the right
direction in the backdrop of GST is imperative and can be answered by analysing the impact
of GST on various sectors in the economy today. Particularly, it is necessary to focus on and
critically analyse its positive and negative effects on Micro Small and Medium Enterprises
(MSME's), which are envisioned to be the keystone of the ‘Make in India' programme.
MSME's are the driving force of the economy. They employ nearly eleven crore people through
the operation of five crore enterprises producing a heterogeneous basket of about 7,000
different products in India (Singh, 2015). In the era of climate change this sector is likely to
absorb unemployed from the agricultural sector also. But current trends in this sector and the
state of the economy seem to provide bleak prospects for manufacturing industry in India.
MSME's have been languishing under financial, credit and modernisation problems. It is said
to have been working like an unorganised family business with non-tax compliance and hence
not providing its workers with social security benefits. Thus the flagship ‘Make in India'
scheme shall deliver on its promises only if MSME sector is fully formalised and records high
rates of tax compliance. Here is where GST and significance of this study steps in as GST is
likely to be the change maker in the economy for the next ten years or so. Analysing its impact
on MSME's and maximizing upon all of its benefits to MSME's by weeding out its externality
will put India's economic growth trajectory on the right path, perhaps will help achieve a 5
trillion dollar economy.
Presently under GST system evidences show that small businesses operating under the
composition scheme (turnover between Rs.20 lakh and Rs.75 lakh; later the limit was raised to
Rs.1.5 crore) could not give input tax credit (ITC) and if anyone bought from them, then the
buyer had to pay the tax that the small business should have paid. This was the reverse charge
mechanism (RCM). (Kumar, 2017) Also these small businesses were not permitted to make
inter-state sales and hence their market became limited in case they were at the border of the
state. E-way bills were implemented, suspended and again resumed, but phase wise. This added
to the confusion of businesses. Thus a critical analysis of the positive and negative impact of
GST on MSME's is the necessity of the hour.

3
  HISTORICAL BACKGROUND OF IMPACT OF GST ON SMALL
AND MEDIUM ENTERPRISES

MSME stands for Micro, Small and Medium Enterprises. In a developing country like India,
MSME industries are the backbone of the economy.
The MSME sector contributes to 45% of India’s Total Industrial Employment, 50% of India’s
Total Exports and 95% of all industrial units of the country and more than 6000 types of
products are manufactured in these industries. These industries are also known as small-scale
industries or SSI’s.
Statutory provision related to MSMEs
With a view to boost the development of small enterprises in the country, the Government of
India has enacted “Micro Small and Medium Enterprises Development (MSMED) Act, 2006
and set up a separate Ministry of Micro Small and Medium Enterprises, which came into force
w.e.f.02.10.2006.

 History of GST in India

The history of the Goods and Services Tax (GST) in India dates back to the year 2000 and
culminates in 2017 with four bills relating to it becoming an Act. The GST Act aims to
streamline taxes for goods and services across India
GST History
The implementation of the Goods and Services Tax (GST) in India was a historical move, as it
marked a significant indirect tax reform in the country. The amalgamation of a large number
of taxes (levied at a central and state level) into a single tax is expected to have big advantages.
One of the most important benefit of the move is the mitigation of double taxation or the
elimination of the cascading effect of taxation. The initiative is now paving the way for a
common national market. Indian goods are also expected to be more competitive in
international and domestic markets post GST implementation.
From the viewpoint of the consumer, there would be a marked reduction in the overall tax
burden that is currently in the range of 25% to 30%. The GST, due to its self-policing and
transparent nature, is also easier to administer on an overall scale.
When did GST start?
Several countries have already established the Goods and Services Tax. In Australia, the
system was introduced in 2000 to replace the Federal Wholesale Tax. GST was implemented
in New Zealand in 1986. A hidden Manufacturer’s Sales Tax was replaced by GST in
Canada, in the year 1991. In Singapore, GST was implemented in 1994. GST is a value-
added tax in Malaysia that came into effect in 2015.

4
History of GST in India
 2000: In India, the idea of adopting GST was first suggested by the Atal Bihari Vajpayee
Government in 2000. The state finance ministers formed an Empowered Committee (EC)
to create a structure for GST, based on their experience in designing State VAT.
Representatives from the Centre and states were requested to examine various aspects of
the GST proposal and create reports on the thresholds, exemptions, taxation of inter-state
supplies, and taxation of services. The committee was headed by Asim Dasgupta, the
finance minister of West Bengal. Dasgupta chaired the committee till 2011.
 2004: A task force that was headed by Vijay L. Kelkar the advisor to the finance ministry,
indicated that the existing tax structure had many issues that would be mitigated by the
GST system.
 February 2005: The finance minister, P. Chidambaram, said that the medium-to-long term
goal of the government was to implement a uniform GST structure across the country,
covering the whole production-distribution chain. This was discussed in the budget session
for the financial year 2005-06.
 February 2006: The finance minister set 1 April 2010 as the GST introduction date.
 November 2006: Parthasarthy Shome, the advisor to P. Chidambaram, mentioned that
states will have to prepare and make reforms for the upcoming GST regime.
 February 2007: The 1 April 2010 deadline for GST implementation was retained in the
union budget for 2007-08.
 February 2008: At the union budget session for 2008-09, the finance minister confirmed
that considerable progress was being made in the preparation of the roadmap for GST. The
targeted timeline for the implementation was confirmed to be 1 April 2010.
 July 2009: Pranab Mukherjee, the new finance minister of India, announced the basic
skeleton of the GST system. The 1 April 2010 deadline was being followed then as well.
 November 2009: The EC that was headed by Asim Dasgupta put forth the First Discussion
Paper (FDP) , describing the proposed GST regime. The paper was expected to start a
debate that would generate further inputs from stakeholders.
 February 2010: The government introduced the mission-mode project that laid the
foundation for GST. This project, with a budgetary outlay of Rs.1,133 crore, computerised
commercial taxes in states. Following this, the implementation of GST was pushed by one
year.
 March 2011: The government led by the Congress party puts forth the Constitution (115th
Amendment) Bill for the introduction of GST. Following protest by the opposition party,
the Bill was sent to a standing committee for a detailed examination.
 June 2012: The standing committee starts discussion on the Bill. Opposition parties raise
concerns over the 279B clause that offers additional powers to the Centre over the GST
dispute authority.
 November 2012: P. Chidambaram and the finance ministers of states hold meetings and set
the deadline for resolution of issues as 31 December 2012.
 February 2013: The finance minister, during the budget session, announces that the
government will provide Rs.9,000 crore as compensation to states. He also appeals to the
state finance ministers to work in association with the government for the implementation
of the indirect tax reform.

5
 August 2013: The report created by the standing committee is submitted to the parliament.
The panel approves the regulation with few amendments to the provisions for the tax
structure and the mechanism of resolution.
 October 2013: The state of Gujarat opposes the Bill, as it would have to bear a loss of
Rs.14,000 crore per annum, owing to the destination-based taxation rule.
 May 2014: The Constitution Amendment Bill lapses. This is the same year that Narendra
Modi was voted into power at the Centre.
 December 2014: India’s new finance minister, Arun Jaitley, submits the Constitution
(122nd Amendment) Bill, 2014 in the parliament. The opposition demanded that the Bill
be sent for discussion to the standing committee.
 February 2015: Jaitley, in his budget speech, indicated that the government is looking to
implement the GST system by 1 April 2016.
 May 2015: The Lok Sabha passes the Constitution Amendment Bill. Jaitley also announced
that petroleum would be kept out of the ambit of GST for the time being.
 August 2015: The Bill is not passed in the Rajya Sabha. Jaitley mentions that the disruption
had no specific cause.
 March 2016: Jaitley says that he is in agreement with the Congress’s demand for the GST
rate not to be set above 18%. But he is not inclined to fix the rate at 18%. In the future if
the Government, in an unforeseen emergency, is required to raise the tax rate, it would have
to take the permission of the parliament. So, a fixed rate of tax is ruled out.
 June 2016: The Ministry of Finance releases the draft model law on GST to the public,
expecting suggestions and views.
 August 2016: The Congress-led opposition finally agrees to the Government’s proposal on
the four broad amendments to the Bill. The Bill was passed in the Rajya Sabha.
 September 2016: The Honourable President of India gives his consent for the Constitution
Amendment Bill to become an Act.
 2017: Four Bills related to GST become Act, following approval in the parliament and the
President’s assent:
 Central GST Bill
 Integrated GST Bill
 Union Territory GST Bill
 GST (Compensation to States) Bill
 The GST Council also finalised on the GST rates and GST rules. The Government declares
that the GST Bill will be applicable from 1 July 2017, following a short delay that is
attributed to legal issues.
Tax Structure before GST
 Before the implementation of GST, taxation laws between the Centre and states were
clearly demarcated. There were no overlaps between the fiscal powers, whatsoever. The
Centre would levy tax on goods manufacture, except alcohol for consumption,
narcotics, opium, etc.
 The states had the power to charge tax on the sale of goods.
 The Centre would levy the Central Sales Tax that was collected by the originating
states.
 The Centre was also levying service tax on all types of services.

6
Additionally, the Centre was charging and collecting additional duties of customs on goods
that were imported into or exported from India. This tax was levied in addition to the Basic
Customs Duty. This additional duty of customs is referred to as Countervailing Duty (CVD)
and Special Additional Duty (SAD) and it counter balances excise duties, state VAT, sales tax,
and other such taxes.
The introduction of the GST regime made amendments to the Constitution so that the Centre
and states are empowered at the same time to levy and collect GST. This concurrent jurisdiction
of the states and Centre also requires an institutional mechanism that ensures joint decisions
are taken about the structure and operation of GST.
Constitution (One Hundred and First) Amendment Act, 2016
In order to address prevalent issues in taxation, the Constitution 122nd Amendment Bill was
put forth in the 16th Lok Sabha on 19 Dec 2014.
 The Bill suggests levy of GST on all goods and services, except alcohol that humans
consume.
 The tax is levied as Dual GST by the Centre and states/union territories. The component
levied by the Centre is Central Tax - CGST, while that levied by the state is State Tax
- SGST. The tax levied by union territories is Union Territory Tax - UTGST.
 The Centre would levy the GST on inter-state trade or imports of services and goods.
This tax is referred to as Integrated Tax - IGST.
 The Central Government will also levy excise duty on tobacco products, in addition to
GST.
 The tax on five petroleum products, i.e., high speed diesel, crude, petrol, natural gas,
and Aviation Turbine Fuel (ATF) will be outlined later after a decision is made by the
GST Council.
September 2016: A Goods and Services Tax Council (GSTC) was created by the union finance
minister, revenue minister, and ministers of state to take decisions on GST rates, thresholds,
taxes to be subsumed, exemptions, and other features of the taxation system. The state finance
ministers mentioned that the EC would be a platform for states where there would be
discussions of their regional issues. The GST Council is a separate entity that would oversee
the implementation of the GST system.
Decisions taken by GST Council
Some of the major decisions taken by the GSTC so far are:
 There would be four tax rates under the GST regime, i.e., 5%, 12%, 18%, and 28%.
Some goods and services were also classified as exempt from tax.
 A cess above the peak rate of 28% would be levied on certain sin and luxury goods.
 The administrative control over 90% of taxpayers with turnover less than Rs.1.5 crore
would be with the State tax administration. 10% of control would be with the Central
tax administration.
 Administrative control over taxpayers having turnover above Rs.1.5 crore would be
equally divided between the State and Centre tax administration.

7
Goods and Services Tax Network
Goods and Services Tax Network (GSTN) was set up as a private company in 2013 by the
Government under Section 25 of the Companies Act, 1956. GSTN is expected to offer the
front-end services of registration, payment, and returns to taxpayers. It would also develop
back-end technical modules that will be utilised by 25 states that have opted in.
GSTN has also identified 34 IT and financial technology companies and tagged them as GST
Suvidha Providers (GSPs). These organisations will develop applications that will be used by
taxpayers when they interact with GSTN.

Key features of the GST regime

The GST system is characterized by the following features:

 GST is applicable on the “supply” of services or goods as opposed to the earlier concept of
taxation on goods manufacture, sale of goods, or service provision.

 GST is a destination-based tax structure unlike the origin-based structure that existed
previously.

 CGST, IGST, and SGST/UTGST are levied at rates that would be mutually agreed upon
by the states and Centre.

 GST will replace the central taxes mentioned below:

 Duties of Excise (medicinal and toilet needs)
 Central Excise Duty
 Additional Duties of Excise (Goods of Special Importance)
 Additional Duties of Customs (CVD)
 Service Tax
 Special Additional Duty of Customs(SAD)
 Additional Duties of Excise (Textiles and Textile Products)
 Cesses and surcharges
 GST will subsume the following state taxes:
 Central Sales Tax
 Entry Tax
 State VAT
 Luxury Tax
 Purchase Tax
 Entertainment Tax, except that levied by local entities
 Taxes on lotteries and gambling
 Taxes on advertisements
 State cesses and surcharges

8
 Taxpayers with annual turnover of Rs.20 lakh is exempt from GST. For special category
states, this cut-off is Rs.10 lakh. An option of compounding is available to small-scale
taxpayers with annual turnover of Rs.50 lakh or below. The choice of threshold exemption
and the compounding scheme are optional.

 Input credit of CGST shall be used only for paying CGST on the output. Similarly, input
credit of SGST/UTGST will be used only for the payment of SGST/UTGST. Therefore,
the two channels of input tax credit cannot be cross-utilised, except for the payment of
IGST for inter-state supplies.

Benefits of GST Implementation

1. Key benefits of the GST announcement are detailed below:

2. As mentioned above, the GST system will create a common national market that boosts
foreign investment.
3. The cascading effect of taxation will be mitigated.
4. There will be uniformity in laws, rates of tax, and procedures across states.
5. The GST regime is expected to boost manufacturing activities and exports. This would,
in turn, generate more employment and lead to the growth of the economy.
6. Indian products would be more competitive in the international markets.
7. The GST system is likely to improve the overall investment climate in India.
8. Uniformity in the rates of SGST and IGST will reduce tax evasion to a large extent.
9. The average sales burden experienced by companies is expected to come down, thereby
increasing consumption and boosting subsequent production of goods.
10. GST is a simpler system of taxation with smaller number of exemptions.
11. There are automated and simplified methods for processes such as registration,
refunds, returns of GST, tax payments, etc.
12. All interactions will be handled by the common GSTN website.
13. The input tax credit process will be more accurate and transparent, as electronic
matching will be performed.
14. The final price of most goods will be lower when taxation is at the New GST rates.
There will also be a seamless input tax credit flow between the manufacturer, retailer,
and supplier of service.
15. A huge segment of small-scale retailers may be either exempt from tax or may benefit
from low tax rates based on the compounding scheme. Consumers will further benefit
if purchases are made from these small retailers.

9
 
DEFINITION OF IMPACT OF GST ON SMALL AND
MEDIUM ENTERPRISES

DEFINITION OF MSMEs IN INDIA

In India, economic enterprises have been broadly classified into two categories: (i)
Manufacturing and (ii) those engaged in providing/rendering services. Both categories of
enterprises have been further classified into micro, small and medium enterprises based on their
capital investment. The present ceiling on investment for classification as micro, small or
medium enterprises is as under :

Definition of Goods and Service Tax:

New Article 366(12A) of the Indian Constitution defines Goods and Services Tax (GST) as
any tax on supply of goods or services or both except taxes on the supply of the alcoholic liquor
for human consumption.

GST in India
GST was introduced as the constitution (one hundred and first amendment) act 2017 following
the passage of constitution 122nd amendment Bill. Dr. R. Vasanthagopal studied, “GST in
India: A Big Leap in the Indirect Taxation System” and concluded that switching to GST from
current indirect tax system in India will be a positive step to boost the Indian economy. 10 GST
while replacing the VAT (Value Added Tax) solved all the complexities present in the current
indirect tax system. 3 This tax structure provided the Indian economy with a strong tax system
which was much needed for economic development of the country. Thus, Goods and Services
Tax had a positive impact on the Indian economy.

Results and Discussion

Impact of GST on the Indian Economy: GST will impact the overall taxation system
of the Indian economy. 11 It will improvise the country's GDP ratio and also will control
inflation to a certain extent. However, the reform will mainly be advantageous to the
manufacturing industry but will make some things challenging for the service sector industry.
There has been a fall in the cost of production in the domestic market after the introduction of
GST, which is a positive influence to increase the competitiveness towards the international
market. GST is expected to raise the GDP growth from 1% to 2%, but these figures can only
be analysed after successful implementation. GST is also different in the way it is levied at the
final point of consumption and not at the manufacturing stage.
At present, separate tax rates are applied to goods and services. Some countries have faced a
mixed response in growth like New Zealand saw a higher GDP as compared to countries like
China, Thailand, Australia and Canada.12 The GST rate is implemented in various slabs like
5%, 12%, 18% and 28%, which will automatically provide great tax increments to the
government and the manufacturing sector will face immense growth with reduction in tax rate.
There is definitely something good for everyone. 9 Various unorganized sectors which enjoy

10
the cost advantage equal to tax rate will be brought under GST. This will make various sectors
like Hardware, Paint and Electronics etc. under the tax slab.
GST requires everything to be planned meticulously for organized rate of taxation. There are
still lots of sectors which are to be discussed under GST and this requires proper planning. For
the common man and different companies, the collection of Central and State taxes will be
done at point of time when sales originate, both components will be charged on manufacturing
costs and price of the product will downgrade and consumption will thereby increase. 5 There
will be more transparency in the system as the customers will know exactly how much taxes
they are being charged and on what bases.

Impact of GST on various Sectors: Goods and Services Tax will unite the Indian
economy into one common market under a single umbrella of taxation rates7 leading to
easiness of starting and doing businesses, leading to increase in savings and cost reduction
among various sectors. 4 Some industries will be empowered by GST because of reduction in
tax rates while some will lose because of higher rate of GST interests.

(i) Real Estate: The effective GST rate on underconstruction real estate projects will be 12
per cent only and not 18 per cent as there will be abatement for land cost according to a report
by PTI quoting tax consultant EY.

(ii) Effect on transportation: Under GST, cab and taxi rides are taxed lower, from 6% to 5%.
For those who travel by air, GST is favourable as the tax rate is lowered to 5% for the economy
class and 12% for business class. Train fare, meanwhile, is mostly unaffected as the change is
minimal from 4.5% to 5%. Those who travel by sleeper are not affected by the tax rate change
but those who travel first class are charged more.

(iii) Construction Materials: Under revised order from the government, GST on under
construction flats and properties will be taxed at 18% which includes 9% SGST plus 9% CGST.
The government has also allowed deduction of land value equivalent to one-third of the total
amount charged by a developer, thus, making the effective tax rate as 12%. The 12% slab
offered for the real estate sector will not affect at the price of the flat but it will be on building
materials.

(iv) FMCG GOODS: Fast moving consumer goods sector will benefit from the GST due to
the present of big unorganised market. GST rate for products like hair oil, soaps and toothpaste
has been lowered by 500-600 bps from the previous rates. Companies such as Colgate-
Palmolive, HUL, Britanina, Heritage food etc. will benefit from the move.

11
(v) Automobile sector: The automobile Industry is coping up with the GST regime as the
government is very cautious particularly for this sector. The industry of automobiles is
tremendously big which tackles the manufacturing of a very large chunk of cars and bikes every
year. Overall it is defined that the GST impact on the automobile industry is less than the
previous tax scheme due to the lowered tax scenario. As the automobile industry has already
gone through some tough situations like demonetization and after which emissions norms rule
hit the grounds of automobiles sector, now the industry will get benefits out of GST with
minimum hassle-free procedures and rate fixation across the nation.

(vi) Cement industry: The implementation of GST in the country will somehow create a
menace in the cement industry. GST council has decided heavy tax rates over cement industry
of 28 percent which seems to overburden the sector with already prevailing tax entities and
under developing area in the urbanization. Indian cement industry is aimed to grow at a CAGR
of 11.14% in volume terms during FY 2011-FY 2017 and is expected to reach 407 million tons
by March 2017.
Prominent cement manufacturers such as Ultratech, JK Cement and Shree Cement are expected
to get some setback from this decision over new tax reform in India. The reports suggest that
the introduction of 28% Goods and Services Tax on Cement industry will certainly make hard
expansion choice in the Indian cement industry and will affect their profitability as well. GST
India is likely to have a negative impact on the cement industry and will also take the concrete
admixtures manufacturing sector towards downfall.

12
  STATEMENT OF THE PROBLEM
Every initiative taken by the Government will have both pros and cons. It is important to study
which of these two is greater. In the GST bill, it is proposed that if any goods or services are
supplied by a person who is unregistered and supplied to a registered person, then GST needs
to be paid by the registered person under reverse charge as a recipient. Therefore, even if
any small businesses who does not take registration and claim the basic exemption threshold
then the person receiving goods or services from them need to pay GST under reverse charge.

 SIGNIFICANCE OF THE PROBLEM

Since India hasn’t implemented GST, a study of this kind besides creating awareness would
also help in analyzing the pros and cons of GST and the important points that has to be kept in
mind before its implementation as it would affect different stakeholders differently.

13
CHAPTER NO. 2: RESEARCH METHODOLOGY

 OBJECTIVES

 To Know the GST and MSMEs

 To Study the Impact of GST on MSMEs
 To study the GST impact on the Indian economy

 SIGNIFICANCE OF THE STUDY

The study aims at highlighting the positive and negative effect of GST on MSMEs. The study
would also highlight the problem faced by small enterprises in implementation of GST. This
would help the policy makers to design measures to ease the work of MSMEs in
implementation process.

 Research Method
This study is based on primary data collected with the help of structured questionnaire.
Purposive sampling has been adopted for the selection of sample. Data has ted from 59
respondents. All of the respondents were small scale industries (SSI's) or had started as SSI's
(but have grown bigger now) and are mostly into manufacturing of very diverse products like
machine tool components, transformers, electromagnets, industrial chemicals, paints, rubber
moulded and extruded components, automobile components, plastic injection moulding,
bathroom plumbing accessories and fixtures etc. Apart from the survey, insights from the GST
panel chairman in Peenya, Assistant Secretary of Karnataka Small Scale Industries Association
(KAASIA) and Joint Commissioner of Taxes have also been recorded. The area of study is
Peenya industrial area which is the heart of industrial activities in the Bengaluru (urban)
district. Data analysis is done with the help of ratios and percentages.

 NEED FOR THE STUDY

Small scale industrial sector is an important segment of Indian economy. It generates
employment opportunity next to agriculture sector. India is divided into 36 states including
union territories among which some of the states such as Uttra Pradesh, West Bengal, Gujarat
and Tamilnadu are industrially advanced and retaining the dominant position in India. At
present, the state of Tamil Nadu was divided into 32 districts. Chennai, Coimbatore,
Tiruchirappalli, Kanchipuram, Salem, Thriuvallur, Vellore and Tuticorin are the main
districts of industrial and commercial activities. From which Sivagangai is an industrially
and economically backward district in Tamil Nadu. Some of the SSIs in Sivagangai district
are flourished a lot and some of the mare not showing good performance. So, the researcher is
interested to take up the research work on growth, trends problems and prospects of Micro
an Small Enterprises in Sivagangai district of Tamil Nadu.

14
  DATA ANALYSIS
DESCRIPTIVE ANALYSIS
Social Economic profile is both quantitative and quantitative aspects of selected human
population .The following section presents the social and economic profile of the respondents
which includes composition, gender, Age, Educational Qualification, Marital status and
Monthly wise income.

 LIMITATIONS OF THE STUDY

Though there are a lot of advantages to GST, SMEs may have reservations about
transitioning to GST and getting used to the new tax regime within a short period of time.
Their concerns might include increased compliance costs and numerous returns. Here are
a few negative effects of GST that are likely to affect SMEs.

 CHALLENGES FOR SMES

A size able portion of SMEs are of the opinion that GST is not all good for the sector and their
fears may not be totally vacuous. The tax neutrality that the SMEs enjoy may be one of the
prominent benefits. However, reduction in duty threshold is one of the key concerns that has
led them to be wary of the GST bill. Under the existing excise tax, no duty is paid by a
manufacturer having a turnover of less than rupees 1.50 crores. But, post GST implementation,
the exemption limit will get significantly lowered. During a speech at a news conference,
Finance Minister, Arun Jaitley estimate said, the limit can be as low as rupees 25 lakh. As a
result, a large number of SMEs and startups will be mandated to come under the tax net and
will have to pay a large chunk of their earnings towards tax. Furthermore, there are other flip-
sides to the proposed tax neutrality. GST regime won’t differentiate between luxury goods and
normal goods; these will it hard for the SMEs to compete against large enterprises. GST that is
ultimately levied on supply will not be available for input credit. This will lead to an increase
in the cost of the products for businesses that supply directly to end users.

15
  RESEARCH METHODOLOGY

 SOURCES OF DATA

This study consists by both primary and secondary data. The primary data will be collected
through the structured interview schedule selected Micro & Small Scale industry on GST in
Sivagangai district. The Secondary data have been collected from published and unpublished
reports, handbooks, action plan, pamphlets of Director of Industries and Commerce, Chennai,
District Industries Centre, Sivangagai and Panchayat Block Offices concerned. In addition,
Text Books, Journals, Magazines, News papers, Government Gazettes, Reports of the
Government and internet etc., have also been used.

 SAMPLE SIZE AND SAMPLING TECHNIQUE

There are 1722 MSMEs in Sivagangai (as mentioned in Table I) out which 1375 are
registered as per the Annual Report UAM for the year 2017-18, there are 549 MSMEs in
Enterprises, thus totaling 1375 MSMEs in Sivaganga District. In order to give due
representation to all the categories of Manufacturing Enterprises 826 MSMEs in service
MSMEs, it is proposed to use ‘cluster random Sampling Technique’’ and 10% of the population
for Micro category and 20% in case of Small category and 100% in case of Medium in view
of the lower number of units in the population.

QUESTIONNAIRE: The questionnaire was framed for the study. The questionnaire
pertains to MSMEs view points on implementation of GST. The questionnaires were used to
elicit information on items measuring demographic factors and level of impact on MSMEs with
the aspects of GST.

STATISTICAL TECHNIQUES: The statistical techniques used for analyzing the data
vary from descriptive to multivariate. The details of the statistical tools are Frequency
distribution analysis, Descriptive statistics like mean, standard deviation, Reliability
analysis, Independent t-test, , One way ANOVA (also Called as F test) ,Correlation and
Regression .

16
  METHODOLOGY

Nature of study Descriptive nature

Sources of Data Secondary data
Collection of Data Online and Web Resources
Secondary Data Journals, Magazines, Newspaper, Web site
and Reports

 HYPOTHESIS:

NULL HYPOTHESIS: There is no significant impact of GST on the small scale industries in
INDIA.
ALTERNATIVE HYPOTHESIS: There is a significant impact of GST on the small scale
industries in INDIA.

17
CHAPTER NO. 3: LITERATURE REVIEW

Literature in this field, specifically on the topic of impact of GST on MSME'S is very limited.
However there are some published journal articles and newspaper reports. Scholars Prasad and
Satya have theoretically listed out the positive and negative impacts of GST on MSME's i.e.
the positive impacts will be that starting business becomes easier, improved MSME market
expansion, lower logistical overheads, reduction of tax burden on new businesses and negative
impacts will be the burden of lower threshold on tax exemption etc. (Prasad & Sathya, 2017)
Dr. Sonia and her co-authors are of the view that the government has implemented GST with
a long-term vision but it has increased the technology dependency of every enterprise which
has become a great challenge for SMEs. (Verma, Khandelwal, & Raj, 2018) A paper released
by the Confederation of Indian Industries (2015) states that the lower threshold on tax
exemption will greatly impact the SME's working capital but on the other hand GST will also
lead to expansion of MSME's market. In another paper it's argued that after demonetisation,
the introduction of GST brought with it a fresh wave of challenges, especially for the informal
sector. Along with the initial confusion about GST forms and infrastructure glitches, there has
also been reported
a delay in receiving ITC which has directly affected the MSME's. Moreover he says that the
supply chains have also been affected. (Sinha, 2018) Further another paper states that with all
the compliance procedures under GST — Registration, Payments, Refunds and Returns now
being carried out through online portals only, SMEs need not worry about interacting with
department officers for carrying out these compliances, which were considered as a headache
in the previous tax regime. (Venkateshwarlu & Vijaylakshmi, 2018) Another scholar has
argued that India's paradigm shift to GST regime will increase the compliance fees of MSME's
and snare a majority of them into the oblique tax internet for the first time. (Kumari, 2018)
Lastly, a paper states that as under the provisions of RCM if a registered person buys goods
from an unregistered trader/dealer the tax is to be paid by the registered person and this will
increase the working capital requirements of the registered persons. Hence registered
businesses will prefer to deal only with the registered businesses. This will in turn negatively
impact unregistered dealers by hampering their growth and development (Pandit, 2017).
Most of the existing papers are theoretical, drawing inferences from secondary source data.
Thus it is evident that there is a lack of any kind empirical investigation into the impact of GST
on MSME's especially through primary data information. Hence this paper attempts to address
this research gap through empirical investigation.
World Bank (2018) and et all other research study on “GST in India” concluded that the Indian
GST system is among the most complicated ones in the world, with its high tax rates and a
larger number of tax rates and negative impact on its economy.

18
  Pallavi Kapila (2018) the article entitled “GST: Impact on Indian Economy”, In this
research paper an attempt has been made to throw light on how GST would help in
reducing the existing complexity of taxes in India as it subsumes VAT, Excise Duty,
Service tax and Sales tax. The study found that, the implementation of GST had played
an important role in the growth of Indian economy. A uniform and rational taxation
system in India would lead to lesser disruptions in the market economy and more
efficient distribution of resources within the industry in the near future. The study also
found that, GST will lead to an increase in GDP and exports of the country, enhancing
economic welfare and returns to the factors of production i.e. land, labor and capital.
 Dr. N. L. Balasudarsun and Melvin Paul Antony (2018) the article entitled “Impact of
Demonetization and GST in Life Insurance Sector”. This paper deals with impact of
Demonetization and GST on life insurance sector. For this purpose 130 was collected
from life insurance employees of Cochin region based on random sampling method.
Descriptive statistics and ANOVA test were used to analyze the data. The study found
that, Demonetization and GST have life insurance sector.
 Jadhav Bhika Lala (2017) the article entitled “Impact of GST on Indian Economy”. In
this paper an attempt has been made to throw light on GST, its features and also effect
of GST on prices of goods and services. The study found that, the GST system is
basically restructured to simplify current critical indirect tax system in India. The study
also found that, a well designed GST is an attractive method to get liberate of
deformation of the existing process of multiple taxes and reduce the compliance burden.
 Prof. Pooja S. Kawle and Prof. Yogesh L. Aher (2017) the article entitled “GST: An
Economic Overview: Challenges and Impact Ahead”. The research intends to focus on
understanding the concept of goods and service tax and its impact on Indian economy.
The study found that, GST may assure the possibility of overall gain for industry, trade
and agriculture. The study also found that, GST will have positive impact on the Indian
economy.
he study concludes on the basis of the literature that GST"s impact will be having both positive
and negative implications on food sector i.e. higher the tariff on restaurants (where room tariff
more than 7500) have 18% tax which is regressive in nature which reduces the frequency of
people visiting to restaurants and the lower tariff hotels with 5% GST have benefited .Where
as in comparison with other neighboring countries like China, Malaysia and Singapore the GST
rate is higher in India.
Diksha panwar and Sidheswar Patra (2017) dissected the effect of GST on Restauraunts
and nourishment administration business in India , the target of the examination was to
discover the experiences in execution and to feature the unfavorable impacts of cafés and
nourishment industry. The investigation presumes that incessant change in charge rates and
backward tax collection strategy disheartens the new contestants in the café business.
Dr.Kala Ganeshan and Deepa (2017) conveyed a contextual analysis on GST in the
administration area with extraordinary reference to Hotel industry. The goal of the
investigation was to examine an outcomes of GST on Chidambaramvials extravagance
resort . The investigation finishes up at a positive note that it's a straightforward and uniform
assessment the nation over which could decrease tax avoidance and make sends out
increasingly serious, could carry more income to the exchequer.

19
Shana and Rohit bhat (2018) analyzed issues of GST on lodging industry in Mysore area, the
investigation objective was to inspect the discernments towards GST among buyers based on
populace extent and the examination dependent on test study. The examination finds and
reasons that the age bunch till 30 yrs in the area were not having clear comprehension on
the framework than the above age gatherings. Not many of the clients have the issue in
installment of extravagance charge. The execution of GST had diminished the installment of
different charges at each phase of business movement and perceived as one assessment.
Aswathy Krishna and et.al (2018) dissected the impacts of GST on inn industry. The
examination portrays the upsides and downsides of the GST in the inn business and it infers
that organizations which centers around nourishment and refreshments could be the greatest
recipients with in the neighborliness sector(budget inns profited), the inns with the levy scope
of 18-28% hit gravely. Bharati Sharma and et.al (2018) read important tax assessment
framework for café industry contrasting VAT and GST and investigating the effect on buyer
and eatery proprietors. The examination presumes that GST is important framework for
both eatery proprietors and customers, improving the fundamental portion of buyer by
decreasing the taxation rate. It will straightforwardly affect on the productivity of entrepreneur
as decreased expense draw in more clients and will expand the market development of café
industry additionally the GDP of Indian Economy. Ann Abraham and Dr.Tomy Mathew
(2019) considered the effect of GST on Hotels in Kerala, the examination objective was
to take a gander at the assessments of hoteliers and dissect the issues looked by the hoteliers
and to search out the ascent in consistence cost of GST. The investigation dependent on testing
infers that presentation of GST rates in inns met with obstruction from the hoteliers. In any
case, after the update in charge rates larger part of hoteliers communicated confidence inside
the framework. Though greater part of them have brought about extra expense on the move
towards new arrangement of tax assessment it has been effective. Faizanbhai A.Saeeda (2019)
this paper gives a rundown of effect of GST on different parts of eateries and lodging
organizations in Anand and Nadiad area. The examination received example study utilizing
factors like deals, benefit and purchasing by the eateries and so forth. The examination
presumes that GST influences positive on offers of inns and cafés and on the obtaining by
lodgings and eateries it influences positive to unbiased and just if there should be an occurrence
of eatery the benefits stay consistent.
G. Garg, 6 (2014) analysed the impact of GST on Indian tax scenario. He tried to highlight the
objectives of the proposed GST plan along with the possible challenges and opportunity that
GST brings. He concluded that GST is the most logical steps towards the comprehensive
indirect tax reform in our country since independence. GST is leviable on all supply of goods
and provision of services as well combination thereof. All sectors of economy i.e the industry,
business including Govt. departments and service sector shall have to bear impact of GST. All
sections of economy viz., big, medium, small scale units, intermediaries, importers, exporters,
traders, professionals and consumers shall be directly affected by GST. One of the biggest
taxation reforms in India – the Goods and Service Tax (GST) is all set to integrate State
economies and boost overall growth. GST will create a single, unified Indian market to make
the economy stronger. Experts say that GST is likely to improve tax collections and Boost
India’s economic development by breaking tax barriers between States and integrating India
through a uniform tax rate. Under GST, the taxation burden will be divided equitably between
manufacturing and services, through a lower tax rate by increasing the tax base and minimizing
exemptions.

20
Pinki et al., 7 (2014) the authors in the paper have explored the concept of GST, the need to
introduce it in India, the hurdles in introducing it in India and suggestions to overcome the
same. The paper also discusses the benefits of introducing GST at the earliest. The authors have
discussed the options to introduce the dual GST in India which could be Concurrent Dual GST,
National GST or State GST. Under the concurrent dual GST the better option was the one
where GST is applied on both goods and services. The other option explored was whether the
Central GST would be on goods and services but state GST would be only on goods since state
to collect GST in services is difficult to determine. This option also recommended one single
return with both CGST and SGST details and PAN based registration. The authors have also
discussed the constitutional amendments required if GST is ever to be introduced since without
the amendment taxing both goods and services using one tax is not possible. The paper also
highlights the issues in the credit mechanism in the CGST/SGST model since it is difficult to
practically implement in terms of determination of place where service is taxable. The other
challenges to introduction of GST in India highlighted are the availability of strong IT network,
infrastructure and programmes, agreement on other provisions like basic threshold, exemption
to goods/services, rates to be applied,
Rashid et al., 8 (2014) in this paper the authors study impact of GST in Malaysia since it is
proposed to introduce GST in Malaysia in 2015. The GST is being introduced mainly so as to
increase the revenue collections of the government and reduce the deficit. The authors have
studied the impact of the introduction of this GST and its relation to certain indicators like the
consumer price index and the structural balance. For this the relation between these factors and
the GST are studied for Singapore, Thailand and Indonesia so that whilst implementing GST
in Malaysia the administration can adopt the best practice. The paper recommends transparency
in implementing GST and review of the rates/base of GST after 5 years and rectification based
on the 5 year experience.
N. Kumar, 9 (2014) concluded that GST will help in eradicating economic distortion by current
Indian tax system and is expected to encourage unbiased tax structures which will be indifferent
to geo locations.
Jaiprakash ( 2014) in his research study mentioned that the GST at the Central and the State
level are expected to give more relief to industry, trade, agriculture and consumers through a
more comprehensive and wider coverage of input tax set-off and service tax setoff, subsuming
of several taxes in the GST and phasing out of CST.
Saravanan Venkadasalam, 10 (2014) has analysed the post effect of the goods and service tax
(GST) on the national growth on ASEAN States using Least Squares Dummy Variable Model
(LSDVM) in his research paper. He stated that seven of the ten ASEAN nations are already
implementing the GST. He also suggested that the household final consumption expenditure
and general government consumption expenditure are positively significantly related to the
gross domestic product as required and support the economic theories. But the effect of the
post GST differs in countries.
Shaik et al , 11(2015) studied the concept and impact of GST on Indian economy. The study
also focused on some aspects of GST models. This study also covered the advantages and
working of GST. The study concluded that GST in Indian framework will lead to commercial
benefits which were untouched by VAT system and would essentially leads to economic
development.

21
 Sehrawat & Dhanda, 12 (2015) conducted a study focused on advantages and challenges of
GST faced by India in execution. They concluded that a simplified and transparent tax system
was the need of Indian economy. Pointing out the various advantages they said that GST will
provide India a world class tax structure and a seamless tax system but it will depend upon
effectiveness of its implementation.
Khurana & Sharma, 13 (2016) conducted a study with a view to explore various benefits and
opportunities of GST by throwing a light on its’ background, objectives of proposed GST plan
and its impact on Indian tax scenario. They concluded that GST implementation will definitely
benefit producers and consumers although its’ implementation requires concentrated efforts of
all stake holders especially central and state government.
Munde & chavan , 14 (2016) conducted a study to discuss the pros and cons of GST and
accordingly make suggestions to minimise loopholes and make it more effective. They
concluded that if the probable loopholes are dealt effectively, tax payers will accept the change
brought upon and if procedures in GST proves to be simple and assures the involvement of
interest of all stakeholders then definitely it will lead to economic development and
rationalization of prices.
Kumar, R., 15 (2016), in his paper ‘Comparison between Goods and Services Tax and Current
Taxation System – A Brief Study’ differentiate the GST framework and previous taxation
system and highlighted the impact of GST on Indian economy.
Khurana, A. And Sharma, A., 16 (2016), in their paper ‘Goods and Services Tax in India – A
Positive Reform for Indirect Tax’ highlighted the objectives of GST and reforms in indirect
taxation system in India. And conclude after implementation of GST, manufacturer, wholesaler
and retailer can be easily recovered input taxes in form of tax credit.
Shefalidani, 17 (2016) stated impact of GST on Indian economy in the study in which some
benefits of GST such as one nation one tax, free from cascading effect, increase consumption
due to cascading effect, transparency and GDP growth are studied. Petroleum products, real
estate, and liquor are free from GST.
Dani, S., 18 (2016) in her research study revealed that GST being a system replacing all indirect
taxes might hamper the progress of the country as the attempt to implement it is not being made
whole heartedly.
Lourdunathan F and Xavier P., 19 (2016) studied inexplicit opinion of manufacturers, traders
and society. It also included challenges and prospectus of GST in future in India. Centre and
state level taxes also discussed in this paper. Various states are shown in which GST is followed
for growth of economy. Some issues such demonetisation issue, inappropriate time, polictical
issues, rate for manufacturers and traders, impact on working and cash flow and
implementation in unorganised sectors became some main issues in path of GST.

Lourdunathan & Xavier, 20 (2017) conducted a study based on exploratory research technique
on the basis of past literature to study the opinions of manufacturers, traders, society etc. about
the GST and the challenges and prospects of introducing GST in India. They concluded that
no doubt GST stands with one tax one nation slogan and will provide relief to producers as
well as consumers. Its efficient implementation will lead to resource and revenue gains. They

22
also said that seamless credit and return processing without human intervention requires
educating, training, and conducting workshops on GST on the part of government.
Mujalde, S. and Vani, A., 21 (2017), in their research paper on ‘Goods and Services Tax (GST)
and its outcomes in India’ focused on the features of GST, impact of GST on Indian economy
and discussed possible advantages and challenges of GST.
Nath, B., 22 (2017), in his paper on ‘Goods and Services Tax: A Mile Stone in Indian
Economy’ discussed benefit and impact of GST on Indian economy and also conclude that
GST has a positive impact on various sectors and industries.
Nishitha Guptha, 23 (2017) in her study stated that implementation of GST in the Indian
framework will lead to commercial benefits which were untouched by the VAT system and
would essentially lead to economic development.
Kawle ,S, P. and Aher, L.,Y., 24(2017) in their research paper highlighted the working of GST
in India along with its impact on the Indian economy.
Nayyar, A. and Singh, I., 25 (2017) in their study cited that introduction of GST is a major
breakthrough in the Indian economy. It will help in redefining the Indian Tax Structure by
being more transparent and corruption free.
Abda, S., 26 (2017) in his research paper concentrated on the objectives, purpose and benefits
of GST to our economy and how it will help in strengthening it.
B, MitraPriya, 27 (2017) stated GST as a Game changer in Indian Economy. The paper showed
that GST reduced complexity of various taxes and also removed cascading effect. Tax structure
shown in paper in which various tax rates included. Impact on Tax incidence included various
sectors such as Telecom, E- Commerce, Automobile, real estate, banking and consumer goods.
Impact on input tax credit showed that there would be availability of cross credit utilization in
CGST and SGST.
Kapoor Kapil, 28 (2017) critically examined GST implementation, models, mechanism, issues
and challenges. Development stages GST in India studied in this paper. Exclusions from GST
which is petrol alcohal, tobacco, Diesel and some benefits such as simplicity, transparency,
cascading effect, reduction in burden of tax tax revenue collection, economic growth and no
tax for exporters are included in this paper. Challenges also studied in the paper. So the paper
concluded that proper implementation of GST will lead to economic growth.
Yadav, S. S. and Shankar, R., 29 (2018) in their research paper analysed the history and
evolution of GST in the country and how it has replaced various indirect taxes. Rupa, R. (2017)
in her research paper explained the concept of GST. Also she highlighted the advantages and
disadvantages of GST in our economy.

23
CHAPTER NO. 4: DATA ANALYSIS, INTERPRETATION AND
PRESENTATION

RESULTS
Before analysing the impact of GST it would be appropriate to have an understanding regarding
the various aspects of the business in the given context. This has been explained in terms of the
nature of business activity, number of years of working experience of the respondents etc. This
would be helpful in terms of understanding the effect of GST on the selected respondents.
Table 1: Age of the Sampling Firms
Age of Sample Frequency percent
Less than ten years old 10 16.9
Ten to thirty years old 49 83.1
total 59 100.0
Source: Primary survey (2019)
From the Table 1 that majority of the firms (83.1%) were in the given business for more than
10 years and only 16.9 percent had an experience below 10 years.

 DISCUSSION
This section gives an insight into the major discussion points related to the findings in the
previous section. The survey reveals that all the respondents had chosen the Input Tax Credit
(ITC) method over the composition scheme under GST, citing many benefits associated with
it. Thus the Composition Scheme has been a non-performer with not a single respondent opting
for it. This is because a fixed rate deprives the business from ITC and also under composition
scheme, there is no opportunity for inter-state sales. Hence the potion for Composition scheme
can be negated.
Just as a number of scholarly works envisioned that GST would decrease the prices of products,
improve businesses and increase the tax compliance (Prasad & Sathya, 2017), the survey shows
that there was a decrease in the prices of industrial products due to the implementation of GST.
But at the same time, the survey results show an improvement in the sales of the firms in the
new tax era. They were also of the opinion that the increased sales cannot be completely
attributed to GST as there are other factors like the increased demand which would have led to
an increase in the sales in the post GST era also. All of the young SSl's respondents said that
their tax compliance had increased in the post GST period but the older and bigger industries
said there was no change in tax compliance. Further the opinion was almost equally divided
about whether or not GST had impacted their production and distribution chain.
In the case of the cost of doing business, majority opined that there was no drastic decrease in
the cost but also mentioned that the changes may be seen at a later stage. In the case of RCM,
most of the respondents raised strong objection. Most of them refuse to take upon the burden

24
of paying the tax on behalf of the supplier and moreover even if they agree to take supplies
from an unregistered person, a problem arises when the transporters (who are compulsorily
registered under the e-way bill system) refuse to carry out unregistered business. Also RCM
might just force very small traders to register under GST but they may not report to the system
for ITC. This will result in GST being a burden on them. However on the other hand, the
intention of the government behind the introduction of RCM was to formalise the informal
MSME's, force them to come under the tax net. Thus the costs and benefits of RCM must be
weighed carefully as an 8.4% increase in tax payer's base post GST (as posted on Facebook by
former Finance Minister Arun Jaitley) may or may not have been contributed to by the informal
sector due to RCM itself and also it must be taken care of that RCM restrict business of micro
businesses, crucial for Make in India. Hence RCM alone is not viable at least not now but can
re introduced later as MSME sector and the economy as a whole grows stronger.
Majority of the respondents said that they faced problems due to dual administration of GST
like bureaucratic pressure, reduced ease of doing business etc. An example of the same was
evident when a conference organised at KAASIA spiralled into a heated debate over the E-
Way bill system. Presently the central government mandates production of E-Way bill for
inter-state sales of over 50, 000 only while the state governments are given discretion to
mandate their own rules for intra-state sales. Karnataka has mandated production of E-Way
bills for every transaction within the state irrespective of its value and these differed centre-
state regulations have caused a lot of confusion and pressure of bureaucracy on businesses.
The E-Way bill system is not a revolutionary action in Karnataka for the government had
introduced a similar E-Sugama system four years earlier. However, the digitalisation of the
entire process especially for inter-state sales has been very advantageous in terms of
transparency and ease of doing business. Further, GST has led to an expansion in inter-state
sales according to a majority of 64% of the respondents.
A probe into the technical side of GST implementation shows that majority of the respondents
didn't face any issues with respect to the GST portal in terms of filing of returns and claiming
procedures. A majority of respondents said that the Central Excise Duty was a burden and that
it being subsumed under GST is a big relief. On the whole, most of the respondents including
a former nominee for post of President of Peenya Association, Mr B. K. Hanumanthaiah said
that GST was 'good system', has increased ease of doing business and were expecting more
reforms and benefits in the years to come when the system would be more stabilized and cleared
of confusions.
Insights from leaders within the industry
During the survey a number of eminent industry persons were also interviewed. The joint
secretary (urban) of KASSIA Mr Suresh. N. Sagar opined that, “taxation of labour work was
an extreme burden on businesses”. He said that KASSIA on behalf of Karnataka state small
scale industries has already even submitted a plea asking the Central government to separate
the definitions of job work and labour work as already done in Gujarat and Kerala.
Vijay Kumar S Makal, panel chairman of Goods and Service Tax in Peenya Industries
Association voiced the issue of refunds pending with the previous tax system and the burden
of penalty under GST. He gave an example of his friend whose 1.75 crore refund of CGST is
pending for a year now. The time limit for refund is 60 days and if exceeded then an interest

25
of 6 percent is to be paid by the government. But Mr Kumar says that this if not enough in the
backdrop of squeezing of loans and increased interest rates imposed on MSME' by banks.
Further, about the penalty for non-payment of GST within the deadline, he says that an email
is sent to the concerned industry reminding of non-payment of GST which also includes a
buffer time of 30 days. But in case the industry fails to read the email, is caught in some losses
or in the confusion about GST and fails to pay tax then after 30 days their bank accounts are
sealed followed by imposition of fine and further delay invites closure of the industry itself.
“The industry shall have no recourse except for a court battle” says Mr Kumar and suggests
that at least until the new tax regime is stabilized the intensity of penalty must definitely be
reduced.
The Joint Commissioner of Commercial Taxes (Bangalore), Smt. Pushpalatha here at a
KASSIA meeting said that, “industries do suffer from the blame game played by the state and
central government in the backdrop of dual administration of GST but this is not done
intentionally. Administrators are strictly advised to resolve issues in a time bound manner and
the delay is part of the entire system itself. The industries have to demand service and officials
are obliged to provide for"

OPPORTUNITIES & CHALLENGES FOR SME’S

• GST is going to widen the taxpayer base

Earlier, any manufacturer with a turnover of Rs 1.5 crore or less was not required to comply
with the rules of excise duty. However, with the merging of all State and Central level taxes
into the ambit of GST, any manufacturer with a turnover of Rs 20 lakh (others) /10Lakh (North
Eastern States) or more will have to comply with GST and its procedures.
• All the compliance procedures through online
Registration, Payments, Refunds and Returns will now be carried out through online portals
only and thus SMEs need not worry about interacting with department officers for carrying out
these compliances, which are considered as a headache in the current tax regime.

26
  INTRODUCTION TO MSME

What are Micro, Small & Medium Enterprises?

Definitions of Micro, Small & Medium Enterprises In accordance with the provision of Micro,
Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and
Medium Enterprises (MSME) are classified in two Classes:
1. Manufacturing Enterprises-the enterprises engaged in the manufacture or production of
goods pertaining to any industry specified in the first schedule to the industries Development
and regulation Act, 1951 or employing plant and machinery in the process of value addition to
the final product having a distinct name or character or use. The Manufacturing Enterprises are
defined in terms of investment in Plant & Machinery.
2. Service Enterprises:-The enterprises engaged in providing or rendering of services and are
defined in terms of investment in equipment.
The limit for investment in plant and machinery / equipment for manufacturing/service
enterprises, as notified, vide S.O. 1642(E) dtd.29-09-2006 are as under

Manufacturing Sector
Enterprises Investment in plant & machinery
Micro Enterprises Does not exceed twenty five lakh rupees
Small Enterprises More than twenty five lakh rupees but does
not exceed five crore rupees
Medium Enterprises More than five crore rupees but does not
exceed ten crore rupees

Service Sector
Enterprises Investment in equipments
Micro Enterprises Does not exceed ten lakh rupees
Small Enterprises More than ten lakh rupees but does not
exceed two crore rupees
Medium Enterprises More than two crore rupees but does not
exceed five crore rupees

27
GOODS AND SERVICES TAX (GST)
India’s paradigm shift to the Goods and Services Tax (GST) regime in July 2017 will increase
the compliance costs and snare a majority of Micro, Small and Medium Enterprises (MSMEs)
in this state into the indirect tax net for the first time. The Goods and Services Tax bill, touted
to be India's biggest tax reform, will simplify the current system of taxation. It seeks to convert
the country into a unified market by replacing regional and local taxes with a single and uniform
system of taxation by bringing all taxes under a single umbrella. Various taxes like Excise
Duty, Value Added Tax (VAT), Central Sales Tax, Luxury Tax and Entry Tax, etc. will all be
included under a single roof by GST.A very important feature of the GST bill is that instead of
collecting taxes at several steps, it will be collected in one step. OneCountry-One-Tax GST,
will reduce the cascading effect of taxes on taxes, increase productivity, transparency, and tax-
GDP ratio as well as reduce tax evasion and corruption. With five different rate slabs, the
proposed GST structure intends to widen the tax base and eliminate exemptions. The objective
of the present study, based on the primary and secondary data is to assess the impact of GST
on MSMEs of Uttarakhand with the Selaqui Industrial estate in Dehradun as a case study.
As per the provisional reports of Census India, in 2011, the population of Dehradun, the capital
city was 578420 with 303,411 and 275,009 males and females respectively. The percentage of
literates in Dehradun city is 89.32%.
Goods and Services Tax Network (GSTN)
The GSTN software is developed by Infosys Technologies and the Information Technology
network that provides the computing resources is maintained by the NIC. "Goods and Services
Tax Network" (GSTN) is a nonprofit organisation formed for creating a sophisticated network,
accessible to stakeholders, government and taxpayers to access information from a single
source (portal). The portal is accessible to the Tax authorities for tracking down every
transaction, while taxpayers have the ability to connect for their tax returns.
The GSTN's authorised capital is ₹10 crore (US$1.3 million) in which initially the Central
Government held 24.5 percent of shares while the state government held 24.5 percent. The
remaining 51 percent were held by non-Government financial institutions, HDFC and HDFC
Bank hold 20%, ICICI Bank holds 10%, NSE Strategic Investment holds 10% and LIC
Housing Finance holds 11% .[41][42]
However, later it was made a wholly owned government company having equal shares of state
and central government

28
  MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT

(MSMED) Act 2006

The Micro, Small and Medium Enterprises Development (MSMED) Act was notified in 2006
to address policy issues affecting MSMEs as well as the coverage and investment ceiling of
the sector. The Act seeks to facilitate the development of these enterprises as also enhance their
competitiveness. It provides the firstever legal framework for recognition of the concept of
―enterprise‖ which comprises both manufacturing and service entities.
It defines medium enterprises for the first time and seeks to integrate the three tiers of these
enterprises, namely, micro, small and medium. The Act also provides for a statutory
consultative mechanism at the national level with balanced representation of all sections of
stakeholders, particularly the three classes of enterprises and with a wide range of advisory
functions. Establishment of specific funds for the promotion, development and enhancing
competitiveness of these enterprises, notification of schemes/programs for this purpose,
progressive credit policies and practices, preference in Government procurements to products
and services of the micro and small enterprises, more effective mechanisms for mitigating the
problems of delayed payments to micro and small enterprises and assurance of a scheme for
easing the closure of business by these enterprises, are some of the other features of the act.

 GST AND MSMEs

The increasing formalization of the Indian economy, especially through digitization, is an
inexorable advance that will upend the business model based on the twin arbitrage of labor and
cash transactions of micro, small and medium enterprises (MSMEs).India‘s paradigm shift to
the Goods and Services Tax (GST) regime in July will increase their compliance costs and
snare a majority of them into the indirect tax net for the first time.

Sharp practices
So far, unorganised MSMEs have grown faster than organised peers because of lower cost
structures stemming from tax avoidance, and not having to pay social security benefits to
employees (such as provident fund and gratuity), and excise duty (if turnover is less than Rs.1.5
crore).Some MSMEs also understate employee base or set up multiple ventures to avoid
breaching tax thresholds. Such sharp practices helped them price products and services
competitively over the past few decades and also maintain operating margins at organised
player levels.
The vicissitudes resulting from the impact of GST are many. To wit, for manufacturers, the
reduction in the threshold for GST exemption to 20 lakh from 1.5 crore means tens of thousands
of unorganised MSMEs will soon be cast into the tax net. And digital transaction trails created

29
by dual authentication of invoices under GST will strengthen tax compliance. Additionally, a
lower tax burden under GST will reduce the cost of raw materials and logistics.

Different for services

For the services sector, though, the tax burden will increase. Hence, organised players with
the ability to hold their price-lines, or pass on any increase in cost to customers, will be able to
maintain or improve profit margins. We believe a simplified tax structure and a unified market
will improve operational efficiencies, especially of MSMEs with a wider reach. Then again,
there was demonetisation. Last fiscal, MSMEs were expected to record on-year top line growth
of 14 to 16 per cent.
However, the impact of demonetisation has been severe in the second half and they would have
closed the year with an increase of just 6 to 8 per cent. But as the effects of demonetisation
fade, growth will pick up in the current fiscal.

A peep into outlook: Positive for light engineering: Light engineering MSMEs rated by
Crisil saw 15 per cent compound annual growth rate in topline between fiscals 2014 and 2016,
with demonetisation causing just a blip.GST is expected to provide a boost to this segment
because of lower tax incidence. The Government‘s thrust on ‗Make in India‘ will also lead to
continued investments, helping the sector maintain growth momentum.
Positive for electrical equipment: Sales in companies rated by Crisil grew way faster at about
23 per cent in fiscal 2016 compared with 16 per cent in 2015. The sector will benefit from
lower freight costs and tax rates. Though growth is expected to be strong this fiscal, cheaper
imports, especially from China, remain a challenge.

Neutral for pharmaceuticals: Sales in companies rated by Crisil grew 11 per cent in
fiscal 2016 compared with 15 per cent in 2015.Demonetisation had a limited impact as the
Government had allowed extended use of the banned Rs.500 and Rs.1, 000 currency notes for
purchasing medicines. We do not foresee any significant difference in tax rates under GST.
This fiscal, too, we expect similar growth.

Neutral for auto components: Between fiscals 2014 and 2016, sales by unorganised auto
component makers rated by Crisil grew at 14 per cent annually compared with 7 per cent for
their organised peers. However, demonetisation led to a short-term drop in sales to original
equipment manufacturers (OEMs), or vehicle makers. This fiscal, OEM sales are expected to
normalise. Organised players will benefit and record moderate growth given the thrust on
digitisation and lower tax rates under GST. Unorganised players catering mostly to the non-
OEM replacement market will be forced to move into the organised domain.

30
Marginally negative for textiles: Sales growth in the textiles-related MSME segment
had already declined from 15 per cent in fiscal 2015 to 8 per cent in 2016.GST will have a
marginally negative impact because of higher tax rates expected. During Crisis‘s interactions
with clients, some of them raised concerns that a unified market would create more competition
in an already crowded and price-sensitive arena with a large number of unorganised players.
Organised players dealing in branded apparel are expected to fare well, though. The sector is
expected to record below-par growth of 5 per cent or lower.

Marginally negative for leather and footwear sectors: Companies Crisil rates in
this segment have seen muted growth and have borne the brunt of demonetisation. With
competition, including from Chinese players being strong, the operating margin has fallen to
as low as 6 per cent for organised players.We do not expect GST rates to vary much from the
current indirect tax rates. Crisil expects overall growth and margins of players to remain
subdued this fiscal.

Monthly and financial performance of development commission, MSME

Under various Promotional and development activities taken up as part of plan schemes, the
number of MSMEs reported to be benefitted during the month of November 2017 was 4,985
as compared to 3,139 during the same period of last year. 20,114 persons were trained in
November,2017 as compared to 9,351 persons in November, 2016.Thenumbers of cases of
credit proposals approved are 15,920 during Nov.‘17 as against 25,971during the month of
November, 2016. The detail of MSMEs and other beneficiaries under the various schemes is
noted in statement below:

31
  RECENT POLICY INITIATIVES OF MSMEs

Ease of Registration Process of MSMEs-Udyog Aadhaar Memorandum

Based on the Hon’ble Prime Minister’s suggestion in his ‘Mann Ki Baat’ on 3.10.2014, to
simplify forms to enable ease of registration of MSME’s, Ministry of MSME has notified a
simple one-page registration form ‘Udyog Aadhaar Memorandum’ (UAM) on 18th September
2015. The simplified one-page registration form UAM was made after consultations with the
states and stakeholders, on the basis of recommendations made by the Kamath Committee on
Financial Architecture and observations/approvals by Department Related Parliamentary
Standing Committee, National Board for MSME and Advisory Committee for MSME etc.
This is a path breaking step to promote ease-of-doingbusiness for MSMEs in India as the UAM
replaces the filing of Entrepreneurs’ Memorandum (EM part-I&II) with the respective
States/UTs. The entrepreneurs in the MSME sector just need to file online, a simple one page
UAM on http://udyogaadhaar. gov.intoinstantlygeta unique Udyog Aadhaar Number (UAN).
The information sought is on self-certification basis and no supporting documents are required
at the time of online filing of UAM. Revised notifications were also issued on 10.01.2017 and
30.06.2017 for inclusion of new features including amendment provisions.
More than 38.95 lakh UAMs have been filed since September 2015upto December 2017. The
filing of the UAMs has also significantly increased the information available with the Ministry
of MSME regarding the trends in the sector and enhanced its capability to monitor trends within
sub-categories within the MSME sector, such as manufacturing, services, enterprises,
employment trends, and investment details.

Framework for Revival and Rehabilitation of MSMEs

In order to provide a simpler and faster mechanism to address the stress in the accounts of
MSMEs and to facilitate the promotion and development of MSMEs, the Ministry of Micro,
Small and Medium Enterprises, Government of India, vide its Gazette Notification dated May
29, 2015 notified a ‘Framework for Revival and Rehabilitation of Micro, Small and Medium
Enterprises. Reserve Bank of India, after continuous follow up, has also issued guidelines to
the Banks on 17.3.2016. Under these guidelines Banks have created a structure for finalising
corrective action plan for revival & rehabilitation of MSMEs.

MSME Data Bank

For facilitating the promotion and development and enhancing the competitiveness of
MSMEs, the Ministry of MSME vide Gazette Notification No. 750(E) dated 29.07.2016 had
notified the MSME Development (Furnishing of information Rules, 2016) under which all
MSMEs are to furnish information relating to their enterprises online to the Central

32
Government in the data bank maintained by it at www.msmedatabank.in. This data bank will
enable the Ministry to streamline and monitor the schemes and pass on the benefits directly to
MSMEs. It will also provide the real-time information about the status of MSMEs under
various parameters. Data Bank is helpful to MSME units, who can now update their enterprise
information as and when required without visiting any government office and also update
information about their products/ services, which can be accessed by government departments
to do procurement under Public Procurement Policy of Government of India. More than 1.22
lakh units have been registered (upto December 2017) under MSME Data Bank since issuance
of its notification.

My MSME
To facilitate the enterprises to take benefit of various schemes by the Office of Development
Commissioner (MSME), his office has launched a web-based application module, namely, My
MSME. This has also been converted into a mobile app. Entrepreneurs will be able to make
their applications and track it on their mobile itself.

Direct Benefit Transfer in the M/o MSME

All welfare and subsidy schemes of Governments of India have been brought under Direct
Benefit Transfer (DBT) with the aim of reforming Government delivery system by
reengineering the existing process in welfare and subsidy schemes, for simpler and faster flow
of funds and to ensure accurate targeting of the beneficiaries, de-duplication and reduction of
fraud. As the nodal point for the implementation of the DBT programmes, DBT cell have been
constituted in the Ministry. In 2017-18 all the 22 schemes of the Ministry of MSME were on
boarded on DBT Bharat Portal out of which 1 scheme (i.e. TREAD scheme) has subsequently
been wound up.

33
  OVERVIEW OF PERFORMANCE OF THE MSME SECTOR

 Role of MSMEs in Indian Economy

The Micro, Small & Medium Enterprises (MSMEs) have been contributing significantly to the
expansion of entrepreneurial endeavours through business innovations. The MSMEs are
widening their domain across sectors of the economy, producing diverse range of products and
services to meet demands of domestic as well as global markets. As per the data available with
Central Statistics Office (CSO), Ministry of Statistics & Programme Implementation, the
contribution of MSME Sector in country’s Gross Value Added (GVA) 1 and Gross Domestic
Product (GDP) 2, at current prices for the last five years is as below:

Contribution of MSMEs in Country’s Economy at Current Price

(Figures in Rs. Crores adjusted for FISIM3 at current prices)
Year MSME Growth Total GVA Share of Total GDP Share of
GVA (%) MSME in MSME in
GVA (%) GDP (in
%)
2011-12 2583263 - 8106946 31.86 8736329 29.57
2011-12 2977623 15.27 9202692 32.36 9944013 29.94
2013-14 3343009 12.27 10363153 32.26 11233522 29.76
2014-15 3658196 9.43 11481794 31.86 12445128 29.39
2015-16 3936788 7.62 12458642 31.60 13682035 28.77

Source: Central Statistics Office (CSO), Ministry of Statistics & Programme Implementation
and MSMS Annual Report 2017-18
The contribution of Manufacturing MSMEs in the country’s total Manufacturing GVO (Gross
Value of Output) at current prices has also remained consistent at about 33%, i.e. one third
during the last five years.
1. Gross Value Added (GVA): It may be noted that estimates of GVA had been prepared at
factor cost in the earlier series (base year 2004-05), while these are being prepared at basic
prices in the new series (2011-12). GVA estimated by production approach: (GVA =
Output – Material Inputs) and GVA estimated by income approach: (GVA =
Compensation of Employees + Operating Surplus +CFC)
2. Gross Domestic Product (GDP): GDP is derived by adding taxes on products, net of
subsidies on products, to GVA at basic prices.
3. FISIM stands for Financial Intermediation Services Indirectly Measured. In the System of
National Accounts it is an estimate of the value of the services provided by financial
intermediaries, such as banks, for which no explicit charges are made; instead these
services are paid for as part of the margin between rates applied to savers and borrowers.
The supposition is that savers would receive a lower interest rate and borrowers pay a
higher interest rate if all financial services had explicit charges.

34
4. Gross Value Output (GVO): Manufacturing Output is defined to include the ex-factory
value, (i.e., exclusive of taxes, duties, etc. on sale and inclusive of subsidies etc., if any) of
products and by-products manufactured during the accounting year, and the net value of
the semi-finished goods, work-in-process, and also the receipts for industrial and non-
industrial services rendered to others, value of semi-finished goods of last years old in the
current year, sale value of goods sold in the same condition as purchased and value of
electricity generated and sold.

Performance of the MSME Sector

Performance of Micro, Small & Medium Enterprises (MSME) Sector in India can be assessed
mainly by the information from the following sources:
● Analyzing the findings of the NSS (National Sample Survey), 73rd Round on
Unincorporated Non-Agricultural Enterprises in Manufacturing, Trade and Other Services
Sectors (Excluding Constructions). This also gives the latest and most comprehensive account
of the performance of the MSME Sector as of the estimated number of 633.92 lakh enterprises,
only 4000 enterprises were large and thereby out of the MSME Sector. The Report on Key
Indicators of the Survey is available atwww.mospi.gov.in.
● Studying the report of the Economic Census conducted by the Central Statistics Office
(Report of 6th Economic Census, 2013) available at www.mospi.gov.in and also at www.
msme. gov.in. CSO started Economic Censuses for preparing frame of establishments,
particularly the ‘area frame’ which could be used for various surveys for collection of detailed
data, mainly on non- agricultural sector of the economy. Six Economic Censuses have been
conducted so far in 1977, 1980,1990,1998,2005and2013- 14.AspertheSixthEconomic Census
(2013), 58.5 million establishments were found to be inoperation.34.8million establishments
(59.48%) were found in rural areas and nearly 23.7 million establishments (40.52%) were
found to be located in urban areas.
● Studying the results of the periodic All India Census of the MSME Sector. Three All-India
Censuses of Small Scale Industries (SSI) were held in 1977, 1988 and 2001-02.The latest
census conducted by the Office of the Development Commissioner (MSME) on Micro, Small
and Medium Enterprises (MSME) is the Fourth All India Census of MSME held in 2006-
07,with base period 2006-07. The final reports of the Fourth All India Census of MSME
covering both Registered and Unregistered Sectors, are available on the website of Office of
DC, MSME at following linkhttp://dcmsme. gov.in/data-stat.htm.
● Collecting information on new registration of Enterprises, previously done through
Entrepreneur Memorandum Part-II (EM-II) filedat DIC still September, 2015. This has
subsequently been replaced by self-declared online filing system under Udyog Aadhaar
Memorandum at udyogaadhaar.gov.in. A summary of the results based on UAM registration
data till 31.12.17.
● Analysing the information available in MSME Data Bank at http:// www.msmedatabank.in
for which, detail data has been provided by the enterprises on receipt of benefit under various
schemes. The objective of the databank is to have one-stop source of information of MSMEs

35
of India, including their, requirement interms of credit, technology, raw material and
marketing, etc. The MIS dashboard of the databank provides real time information on various
types of the MSMEs registered on the databank, which is used for public procurement purposes
by PSUs for procuring from MSMEs. MSME Development (Furnishing of Information) Rules,
2016 have been notified making it compulsory for MSMEs to give the required information
while availing the benefit of grant or subsidy.

Estimated Number of MSMEs in the Country

As per the National Sample Survey (NSS)73rd round,conducted by National Sample Survey
Office, Ministry of Statistics & Programme Implementation during the period 2015-16, there
were 633.88 lakh unincorporated non-agriculture MSMEs in the country engaged in different
economic activities (196.64 lakh in Manufacturing, 230.35 lakh in Trade and 206.84 lakh in
Other Services and 0.03 lakh in Non-captive Electricity Generation and Transmission,)
excluding the MSMEs registered under (a) Sections 2m(i) and 2m(ii) of the Factories Act,
1948, (b) Companies Act, 1956 and (c) Construction activities falling under Section F of
National Industrial Classification(NIC) 2008. Table 2 – 2 and Figure 2 – 1 shows the
distribution of MSMEs activity category wise.

Estimated Number of MSMEs (Activity Wise)

Activity Estimated Number of Enterprises (in lakh) Share (%)
Category
Rural Urban Total
Manufacturing 114.14 82.50 196.65 31
Trade 108.71 121.64 230.35 36
Other Services 102.00 104.85 206.85 33
Electricity* 0.03 0.01 0.04 0
All 324.88 309.00 633.88 100

36
  GST ROLLOUT AND MINISTRY OF MSME

Ministry of MSME had made elaborate arrangements for smooth rollout of GST. The following
were taken involving all the stakeholders:

All field organisations under the Ministry, namely, Office of Development commissioner
(Micro, Small and Medium Enterprises), Khadi and Village Industries Commission (KVIC),
National Small Industries Corporation (NSIC), Coir Board, National Institute for Micro, Small
and Medium Enterprises (NiMSME), Mahatma Gandhi Institute for Rural Industrialization
(MGIRI) opened GST Cells in their respective offices to provide requisite support to MSMEs
with respect to GST issues. More than 20000 persons have been trained in the various nuances
of GST through workshops by M/o MSME and all its field organizations.

● A special issue of Laghu Udyog Samachar was brought out fully dedicated to GST related
issues. It is available online athttp://dcmsme.gov.in/Laghu_Udyog_Samachar.html

● AGST specific window has already been opened within the Internet Grievance Redressal
System (IGMS) of the Ministry of Micro, Small and Medium Enterprises, an entry for which
is also available at the abovementioned GSTMSME Link http://igms.
msme.gov.in/Mymsme/grievance/ COM.

. ● Ministry set up a 24x7 helpline in NSIC to attend to queries.

● Ministry also conducted a wider consultation workshop with all associations in which, the
sector expert pertaining to MSME of the GST Council made a presentation and clarified the
queries and concerns in FICCI Auditorium on 13.07.2017.

37
  IMPACT OF GST ON MSME

The exceptional growth of Small and medium enterprises (SME) has been strictly features in
the economic development of the country since independence. It has contributed to the overall
growth of the GDP as well as in term of employment generation and export in the global
economy. In India, the SME sector has acquired a prominent place in the socio-economic
development of the country during the past 50 years. The damaging factors as experienced by
the SMEs have been cited as low capital base, difficulties in accessing technology, credit
constraint, low access to business services, constraint of quality of human resources, low
market awareness, low lobbying capacity and infrastructural constraints. In the present scenario
of globalization, SMEs are considered engine for economic growth all over the world. After
markets globalization, SMEs are facing constraints to sustain in the market. The purpose of
this document is to examine various issues in context of Indian economic condition as SMEs
account for about 95% of the industrial units, 40% of the industrial production, and 36% of the
total exports and provides direct employment to 18 million persons in about 3.2 million
registered SME units in the country. The scope of the paper examines the growth of SMEs in
global era and its performance in economy. It identifies contribution of SMEs in GDP growth.

Goods and Service Tax (GST) combines both the current Central and State Taxes in
the country into a solitary tax, thereby eliminating the dual taxation system and enabling a joint
nationwide market.

The implementation of this tax allows the government to have an improved hold on the
taxpayers, which, in turn, improves the complete tax scheme and has several other benefits.

This MSME sector of the market has been deliberated as the chief development driver of the
Indian economy for years. SMEs have emerged as the principal employment-creating segment
in India and have delivered stable growth through various sectors of our developing nation.
The impact of GST on MSME has been tremendous.

For Micro, Small, and Medium Enterprises (MSME), the business proprietors and producers
are required to pay various different taxes as per the laws and so, fulfilling all the tax-related
documentations has them running to different departments. Without GST, these entrepreneurs
faced harassment from the various departments they had to report to file their taxes.

At present, the total tax collection in India is around 14.5 Lakh Crore, of which 34% is indirect
tax. Indirect taxes include service tax, stump duty, customs duty, VAT, etc. It refers to the
collection of tax indirectly by the Government of India. In most of the developing countries,

38
the share of indirect tax is higher than the direct tax. However, in the developed countries the
share of indirect tax is much lower. Therefore, the new GST implementation will allow the
government to have a better grip on the taxpayers. This should be capable of evolving the entire
tax system.

Small and Medium Enterprises (SMEs) have been considered as the primary growth driver of
the Indian economy for decades. It is further evident from the fact that today we have around
3 million SMEs in India contributing almost 50% of the industrial output and 42% of India‘s
total export. For a developing country like India and its demographic diversity, SMEs have
emerged as the leading employment-generating sector and has provided balanced development
across sectors. Let‘s examine what would be the impact of GST on Small & Medium
Enterprises.

All the compliance procedures under GST — Registration, Payments, Refunds and Returns
will now be carried out through online portals only and thus SMEs need not worry about
interacting with department officers for carrying out these compliances, which are considered
as a headache in the current tax regime

Direct impact of GST on small and medium enterprises

GST will help and ease the process of starting a business in India. Earlier, every business in
India was required to obtain VAT registration, which differs in every state, and the rules and
regulations are different. Thus it was a very confusing procedure. However, under GST, the
businesses have to only register for GST which will have a centralized process, similar to
service tax.
Currently, for any business, it is mandatory to make a VAT payment if the annual turnover is
more than 5 lakh in few states and 10 lakhs in few other states. This difference in various states
creates confusion. Under GST a business does not have to register or collect GST if the annual
turnover is 10 lakh. This is applicable to every state. This will allow many small businesses
which have a turnover between 5 lakh – 10 lakh to avoid applying for the GST return.
GST allows small and medium business to do business with ease in India, due to the less
complexity. The distinction between the services and goods will be gone, and this will make
compliance easier.

39
Point wise Impact of GST on SMEs

● Low Rates Taxes

With the application of GST, industries having a turnover
betweenRs.10and50lakhhavetopayleviesatlowerrates, thereby, getting an enormous relief from
tax burdens.

● Reduction in Logistics Cost and Time

GST enactment reduced time and money required for Interstate movement as their duties got
eliminated. Also, this diminishes costs of retaining large stocks due to ease in free movement
of goods.

● Creating a Uniform Platform

GST levies taxes on stock transmissions and neutralizes the impact of contributed taxes
through the input credit too, thus, removing all tax differentiation and bringing small and
medium businesses to par with large-scale industries.

● Increased Reach to Customers

Presently, the Central Sales Tax (CST) on sales between states restricts small and medium
businesses to reach their potential customers across India, which surges the acquisition charge
of products for the consumers. The implementation of GST has prevented that.

Small and Medium Enterprises (SMEs) have been considered as the primary growth driver of
the Indian economy for decades. A Medium Small and Minor Enterprise contribute
approximately 38% of our Nations GDP. The implementation of GST is certainly going to
affect this sector. Any negative implication of GST on this sector can directly knock off the
player from the competitive business market. This article tries to put forth various issues that
this industry could face due upon passage GST.

1) Low Basic Exemption Limit:

Under the present excise laws, the SSI’s enjoy the basic exemption limit up to Rs. 1.5 crore.
Under Service Tax laws threshold exemption scheme is available for small service providers
having aggregate value of Rs. 10 lakh in the preceding financial year. Under Vat laws such
exemption varies from State to State. Therefore currently small scale providers enjoy a basic
exemption from Central Excise, Service Tax and VAT levy, if they fall under the threshold
limit. But under GST regime, the exemption limit comes down to Rs. 20 lakh and Rs. 10 lakh
for North Eastern States. This reduction will significantly impact the SMEs working capital.

40
2) Return filling:
Under the current system, VAT or excise returns have to be filed once in three months. Under
GST, returns (sales, purchase) have to be filed thrice in a month (on the 10th, 15th and the
20th). Also one annual return has to be filed i.e. minimum of thirty-seven returns are required
to be filed by every registered taxpayer during a financial year. Thus SMEs will have to deploy
additional resources and eventually cost of compliance will increase.

3) Registration:
Under GST regime every person who is liable to be registered under the Act, shall have to
apply for State-wise registration for supply of goods / services from different States. There is
no concept of single centralized registration under GST regime as is presently done. Small
traders & retailers may opt for different registrations state wise in case of multiple branches or
business verticals if they are engaged in supply of goods or services from such place or have
different verticals.

4) Taxation on Stock Transfers:

Presently, a stock transfer of goods/services is not liable to tax except in case of central excise.
However, no such system is prevalent in state VAT laws. Under GST regime, stock transfer of
goods/services is made liable to tax. This step shall lead to blockage of working capital apart
from high compliance burden. SMEs do not have adequate capacities, technology, manpower
and cash flows to comply with this complex requirement of the law.

5) Input Tax Credit:

Under the current regime, the value of input credit availed is not dependent on the ‘real time’
acceptance of the tax liability by the supplier. However, under GST, input tax credit will be
dependent on your supplier’s compliance i.e. your supplier should file the return declaring the
outward supplies along with the tax payment. If your supplier does not comply, it will cause a
major dent to your cash outflow. For some reason, if your supplier fails to furnish the valid
return, the input tax credit claimed by you will be reversed and you will be asked discharge it
along with interest.

6) Taxability of Advances:
Under GST, on receipt of advance against supply of goods or service at a later date, tax needs
to be paid on the date of receipt of advance. Currently, the concept of paying tax on advance
receipt exists only in Service Tax. This extended provision on goods in GST will impact the
cash outflow of businesses engaged in supply of goods. This is because, all this while, as a
manufacturer or trader of goods, there was no obligation to pay a part of advance as tax, but in
GST, you have to pay.

41
7) Availability of Composition Levy:
SMEs can also opt for Composition Scheme if there aggregate turnover during preceding
financial year does not exceed Rs. 50 lakh. But those who are supplying specified services or
making any supply of goods which are not leviable to tax under the Act or if any inter-state
supply is made they cannot opt for composition scheme. Further, small suppliers making few
of the supplies not chargeable to tax while majority of supplies are taxable may find this
provision an unnecessary burden on them.

8) High Compliance Burden:

Accounting needs to be timely updated and the same needs to be maintained state-wise to
reconcile the taxation with accounts at state level. GST computations, liability calculation,
credit availment etc. has to be done on monthly basis. In a small and medium sector, the
accounting and taxation would not be very strong, stable and streamlined as compared to the
larger sectors. Sometimes, there is no separate division of accounting and the proprietor himself
manages the additional task of accounting and book-keeping which is very common in any
start-up and growing business.

42
Goods and Services Tax (GST) was on the anvil for the past many years and 1-July 2017 finally
saw India shift to the new taxation regime. GST will bring more than 5 million small
businesses, majority of which were operating offline, into the digital ecosystem. It has the
potential of becoming something much bigger than just a one-sided tax system. This digital tax
system has the ability to help Small and medium-size business enterprises (SMEs) take
advantage of their data for easier access to credit, operational efficiencies, managing cash
flows, managing better customer relationships and thus becoming the operating system for
Indian SMEs.

The GST Network

The GST Network (GSTN) is the technology backbone of GST and its ecosystem consists of
three major players, ASPs (Application service providers), GSPs (GST Suvidha Providers) and
the GSTN portal. A taxpayer has the option of directly accessing the GSTN portal or they may
use third party applications (ASPs/GSPs) which in turn will connect via secure APIs with the
GSTN system. Accessing the portal via ASP/GSP is a better option as these applications are
much more user friendly and customer focused. GSPs and ASPs are providing the much needed
support to the GST network. While GSPs are primarily limited to providing enhanced access
to GSTN, ASPs are addressing most taxpayers’ compliance troubles.
Credit goes to GSTN for building the taxation system as an open API-based platform. APIs
will act as building blocks which the ecosystem partners will use to develop innovative
products and solutions. An inherent characteristic of an open platform is its network effect. The
more suppliers (developers) you have on the platform creating apps and delivering innovation
for the consumers, the more consumers will the platform attract.
The ASPs and GSPs should also be looking to leverage the network effects of the ecosystem
and go for an open platform approach. In the API economy, the biggest companies will be the
ones which open the door to third parties and make it possible for third party sellers to sell to
their customers. For example, Quickbooks, a US based financial management, accounting and
tax software for SMEs, turned itself into an open platform. It opened up its APIs and introduced
a developer program to allow third parties to build and sell software products to Quickbooks’
customer base. These products use customer financial and tax data provided by Quickbooks.
A service called Quickbooks financing also enables customers to directly apply to third party
institutions for loans. Quickbooks could have easily sold this data to outside institutions and
earned money, but that would not have made it an open platform.

43
  COMPLIANCE BENEFITS FOR MSMEs UNDER GST

As a trade facilitation measure under GST, following benefits have been extended to Micro,
Small and Medium enterprises under GST:

A. Registration

(i) A UNIT involved in intra – State taxable supply of goods or services or both, if its aggregate
turnover in a financial year does not exceed prescribed amount of threshold exemption limit
i.e. Rs. 20 lakhs (Rs. 10 lakhs in case of the special category states of Nagaland, Manipur,
Mizoram and Tripura), than there is no need to get registered under GST. (prior to 01st April
2019)
(ii) As per Notification 10/2019 – Central tax dt. 07 March 2019 applicable w.e.f. 01stApril
2019, the following category of persons, as the category of persons have been exempted from
obtaining registration under the CGST Act, namely,-
Any person, who is engaged in exclusive supply of goods and whose aggregate turnover in the
financial year does not exceed forty lakh rupees, except, -
(a) persons required to take compulsory registration under section 24 of the said Act;
(b) persons engaged in making supplies of the goods, the description of which is specified in
column (3) of the Table below and falling under the tariff item, sub-heading, heading or
Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said
Table;
(iii)persons engaged in making intra-State supplies in the States of Arunachal Pradesh,
Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura,
Uttarakhand; and
(iv) persons exercising option under the provisions of subsection (3) of section 25, or such
registered persons who intend to continue with their registration under the said Act.
Table
Sl. No. Tariff item, subheading, Description
heading or Chapter
(1) (2) (3)
1 2105 00 00 Ice cream and other edible
ice, whether or not
containing cocoa.
2 2106 90 20 Pan masala
3 20 All goods, i.e. Tobacco and
manufactured tobacco
substitutes

The above modification is definitely going to help MSMEs a lot.

44
(ii) Persons involved in inter – State taxable supply of services not goods, if the aggregate
turnover of a service provider, in a financial year of a unit does not exceed prescribed amount
of threshold exemption limit i.e. Rs. 20 lakhs (Rs. 10 lakhs in case of the special category states
of Nagaland, Manipur, Mizoram and Tripura), there is no need to get GST number.
For inter-state suppliers of goods, registration under GST is a compulsory, even if their
aggregate turnover in a financial year does not exceed the threshold limit Composition levy
scheme.
(iii)Composition levy scheme in GST is an alternative method of levy of tax designed for
micro, small and medium taxpayers whose turnover is upto the prescribed limit of Rs. One
crore (prior to 01 April 2019).(As per Notification 14/2019 – Central tax dt. 07thMarch 2019
applicable w.e.f. 01stApril 2019)
A registered taxable person, whose aggregate turnover does not exceed Rs. 1.50 Crore, as a
supplier of goods (Rs. 75 Lakh for Arunachal Pradesh, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura and Uttarakhand) in the preceding financial year may opt for this
scheme.
Ice cream, pan masala and tobacco manufacturers cannot opt for the GST composition levy
scheme.
Notification No. 2/2019 – Central tax dt. 07th March 2019
However, a supplier of services only (or services and goods together) with annual turnover up
to Rs. 50 Lakh may opt for composition scheme and the rate of GST applicable for such
supplier would be 6%.
(iii) It is very simple, hassle free compliance scheme for small taxpayers. It is a voluntary and
optional scheme. A person opting to pay tax under composition levy scheme can neither take
input tax credit nor it can collect any tax from the recipient.

B. Tax invoice in GST

GST act provides for issuance of tax invoice within prescribed period (i.e. before removal of
goods for supply in case of supply of goods and upto a maximum of 30 days from the date of
provision of service, in case of supply of services) showing the prescribed particulars.
However, there is no specific format prescribed as such for a tax invoice.
In case of supply of goods, the tax invoice has to be prepared in triplicate (original for buyer,
duplicate for transporter and triplicate for supplier); whereas in case of service, the invoice has
to be prepared in duplicate (original for buyer and duplicate for supplier).
Special invoice provisions for MSME Sector
The HSN code required to be mentioned in tax invoice has been done away for taxpayers upto
annual turnover of upto Rs. 1.5 crores. Further, tax payers having annual turnover between Rs.
1.5 Crore to Rs. 5 crores may mention first two digits of HSN code in their invoices and
taxpayers having annual turnover above Rs. 5 crores need to mention full 4 digit HSN code in
their invoices.

45
C. Exemption from compulsory audit for MSME
In GST regime, every registered person whose turnover during a financial year exceeds the
prescribed limit is required to get his accounts audited by a chartered accountant or a cost
accountant As a trade facilitation measure, government has notified that registered persons
having annual turnover upto Rs. two crores are exempted from getting their accounts audited
by a chartered accountant or a cost accountant.

D. Returns in GST
GST Act has provided the manner and time of furnishing of the details of outward supplies by
a registered person, other than certain categories of registered person and manner and time of
communication of these details to the corresponding recipients. The act also has provided for
manner and time period for rectification of errors or omission and payment of tax and interest,
if any.

a) Existing system of return filing process

All eligible registered persons need to furnish electronically, in FORM GSTR-1, the details of
outward supplies of goods or services or both effected during a tax period on or before the
tenth day of succeeding month.
Similarly, all eligible registered persons are required to furnish electronically, in FORM
GSTR-3B, a summary return of liabilities, input tax credit and payment of tax pertaining to
the month on or before the twentieth day of succeeding month.
A person opting to pay tax under composition levy scheme is required to furnish electronically,
in FORM GSTR-4, a quarterly return, of turnover in the State or Union Territory, inward
supplies of goods or services or both, tax payable and tax paid within eighteen days after the
end of such quarter.

b) Special return filing provisions for MSME Sector:

As a trade facilitation measure, the government has notified that all eligible registered person
having annual turnover upto Rs. 1.5 crores may opt for filing of quarterly return, in FORM
GSTR-1 (i.e. the details of outward supplies of goods or services or both effected during the
quarter)

c) Proposed system of simplified GST return filing process:

GST Council has recently approved the new return formats and associated changes in law.
The major change is the option of filing quarterly return with monthly payment of tax in a
simplified return format by the small tax payers. The salient features of proposed GST return
filing process are given below:

(1)Monthly Return and due-date: All taxpayers excluding a few exceptions like small
taxpayers, composition dealer, Input Service Distributor (ISD), Non-resident registered
person, persons liable to deduct tax at source under section 51 of CGST Act, 2017, persons

46
liabletocollecttaxatsourceundersection52ofCGST Act, 2o17, shall file one monthly return.
Return filing dates shall be staggered based on the turnover of the taxpayer. The due date for
filing of return by a large taxpayer shall be 2othof the next month.

(2)Nil return: Taxpayers who have no purchases, no output tax liability and no input tax
credit to avail in any quarter of the financial year shall file one NIL return for the entire quarter.
Facility for filing quarterly return shall also be available through an SMS.
Small taxpayers: Taxpayers who have a turnover up to Rs. 5 Cr. in the last financial year shall
be considered small. These small taxpayers shall have facility to file quarterly return with
monthly payment of taxes on self-declaration basis. However, the facility would be optional
and small taxpayer can also file monthly return like a large taxpayer.

E. E-WAY Bill in GST:

GST Electronic Way Bill i.e. E-Way Bill (EWB) has been implemented in India from 1st April
2018 for inter-state movement of goods and from 16th June 2018, all 36 States / Union
Territories have made EWB applicable for IntraState movement of goods.

Salient features of GST E-Way Bill System-

1) EWB is a document required for movement of goods from one place to another. The
movement may be either (i) from supplier to recipient and vice versa; or (ii) from manufacturer
to job worker and vice versa; or (iii) between two premises of same businessman; or (iv)for
any other purpose.

2) EWB is to be generated by every registered person causing movement of goods of

consignment value (inclusive of GST) exceeding Rs. 50,000/-. For consignments even below
Rs. 50,000/-, EWB is mandatory in case of inter–state movement of (i) goods being sent for
job work; and (ii) handicraft goods..

3) There can be four situations for movement of goods:

(i) Registered supplier to registered recipient: EWB may be generated by either of them
depending on terms of delivery i.e. the person causing movement of goods is responsible for
EWB generation.
(ii) Registered supplier to unregistered recipient: EWB to be generated mandatorily by
registered supplier.
(iii)Unregistered supplier to registered recipient: In such supplies, the movement of goods is
deemed to have been caused by registered recipient and he is required to generate EWB
(iv)Unregistered supplier to unregistered recipient: In such transactions, though EWB Is not
mandatory, it can be generated by either of them on voluntary basis.

47
(4) Normally EWB is not required for exempted goods. In addition, there are few items for
which EWB is not required as detailed in Annexure to rule 138(14) of the CGST Rules.

(5) No distance exemption clause in EWB provisions. Any direct movement of goods between
supplier and recipient warrants EWB, irrespective of distance. However, for Intra- Sate
movement of goods from supplier’s premises to transporter and from transporter’s premises
to recipient, part B is not mandatory, if the said distance is below 50km.

(6)Validity period: For non ODC cargo, the validity is one day for every 100 km. or part
thereof. However, in case of ODC cargo, one day is given for every 20 km. or part thereof.
Validity starts from the time of part B updation (i.e. vehicle number entry) and first day lasts
till 12 midnight of next day.

(7) No changes can be done in part A (i.e. consignment details) of EWB once generated.
However, part B (i.e. vehicle details) can be updated any number of times within validity
period. However, in case of wrong details fed, EWB can be cancelled by generator within 24
hours provided it has not been verified in transit.
EWB can be cancelled by generator within 24 hours;
whereasitcanberejectedbyrecipientwithin72hours. If recipient does not reject EWB within 72
hours, it would be treated as deemed accepted by him.

(8) EWB can be generated online on https://www. ewaybillgst. gov.in. In addition to web,
EWB can be generated by SMS, Android App, APIs, bulk utility, etc.

F. Measures taken for the MSME sector under GST:

Various decisions have been taken by the GST Council in its various meetings for the benefit
of the MSME sector. The details of such major decisions are as below:
i. Goods predominantly manufactured and/or used in the unorganised MSME sector
have been kept at lower rates or are exempted. For instance, electrical switches and
wires, pipeline, plastic products, etc. are largely produced by MSMEs and they earlier
did not pay Central Excise duty and therefore tax rate on these have been brought
down from 28% to 18%. Similarly, rates of GST on jute and coir like hand bags, ropes
etc, which are mainly made in the cottage sector, have been reduced from 12 to 5%.
Rate on Fishing hooks largely used by the fisherman – the industry being largely
labour intensive with insignificant ITC have been reduced from 12 to5%.

48
ii. Upper limit of turnover for opting for composition scheme raised from Rs. 1 crore to
Rs. 1.5crore.

iii. A supplier of services only (or services and goods together) with annual turnover up
to Rs. 50 Lakh may opt for composition scheme and the rate of GST applicable for
such supplier would be 6%. (Notification no. 2/2019 – Central Tax dt. 07th March
2019)

iv. Levy of GST on reverse charge mechanism on receipt of supplies from unregistered
suppliers, to be applicable to only specified goods in case of certain notified classes
of registered persons, on the recommendations of the GST Council

v. Filing of NIL returns to be simplified with one step

vi. Service providers making inter-State supplies whose aggregate annual turnover does
not exceed Rs. 20 lakhs have been exempted from the requirement of registration
under GST vide notification No.08/2017- Integrated Tax, dated 14.09.2017

vii. Extending the Advance Authorization (AA)/Export Promotion Capital Goods

(EPCG)/100% Export Oriented Units (EOU) schemes to sourcing inputs etc. from
abroad as well as domestically. Holders of AA/ EPCG and EOUs are not required to
pay IGST, Cess etc. on imports. Further, domestic supplies to holders of AA / EPCG
and EOUs are treated as deemed exports under section 147 of CGST/SGST Act and
refund of tax paid on such supplies is given to either the supplier or the recipient vide
notification No.48/2017-Central Tax dated18.10.2017.

viii. Supply of taxable goods by a registered supplier to a registered recipient for exports
shall attract a total GST rate of 0.1%thereby reducing working capital blockage for
exporters. This provision has been made effective vide notification No.40/2017-
Central Tax (Rate) dated 23.10.2017 and notification no. 41/2017-Integrated Tax
(Rate) dated 23.10.2017.

ix. Registered persons making supply of goods are required to make payment of tax at
the time of the issuance of invoice and not at the time when advances are received.
This has enimplemented vide issuance of notification No.66/2017 – Central Tax dated
15th November, 2017

x. The GST Council, in its 23rd meeting held on 10.11.2017, decided that taxpayers
having annual turnover of up to Rs.1.5 crore in the previous year would have the
option to file quarterly returns. This has been implemented vide issuance of
notification No. 57/2017 – Central Tax 15th November, 2017

xi. The GST Council, in its 23rd meeting held on 10.11.2017, reduced the amount of late
fee payable for delayed filing of return in FORM GSTR-3B from Rs 200 per day for
delayed filing. Vide notification no. 6A 2017 – Central Tax 15th November, 2017, a

49
 tax payer whose tax liability for the month is ‘Nil’, is liable to pay late fee of Rs.20/-
per day (Rs.10/- per day each under CGST & SGST Acts) subject to maximum of Rs.
5000/- each under Act from October, 2017 onwards. In all other cases, the amount of
late fee payable for delayed filing of return in FORM GSTR-3B by other tax payers
has been reduced to Rs. 50/- per day (Rs. 25/- per day each under CGST & SGST
Acts) subject to maximum Rs.5000/- each under Act from October,2017.

xii. The uniform rate of tax @1% (0.5% under the CGST Act and 0.5% under the
respective SGST Act) is payable under the composition scheme for manufacturers and
traders with effect from 01st January, 2018. This has been implemented vide issuance
of notification No.1/2018- Central Tax dated 1st January, 2018 For restaurant services,
the rate continues to be 5 percent.

xiii. A person eligible for composition scheme also supplying exempt services including
services by way of extending deposits, loans or advances in so far as the consideration
is represented by way of interest or discount, would not become ineligible for the
composition scheme. Further, for computing the aggregate turnover for eligibility for
the scheme, the turnover of exempted services, including services by way of extending
deposits, loans or advances in so far as the consideration is represented by way of
interest or discount, supplied by a taxpayer will not be included. This has been
implemented vide issuance of Order No. 01/2017-Central Tax dated13.10.2017.

xiv. The GST Council, in its 25th meeting held on 18.01.2018, reduced the amount of late
fee payable late fee by any registered person for failure to furnish FORM GSTR-1
(supply details) to fifty rupees per day and twenty rupees per day for NIL filers.

xv. The GST Council, in its 25th meeting held on 18.01.2018, allowed taxable persons
who have obtained voluntary registration to apply for cancellation of registration even
before the expiry of one year from the effective date of registration.

xvi. The GST Council meeting in its 28th meeting held on 21st July, 2018 recommended
certain amendments to be carried out in the CGST Act, 2017 and the IGST Act, 2017,
which are trade friendly measureesslated to benefit the MSME sector.

50
The details of major amendments which are beneficial to the MSME sector
are as below:
a) The upper limit of turnover for opting for composition scheme increased from Rest. 1 core
to Rest. 1.5 cores. Further, composition dealers allowed to supply services only (or services
and goods together) with annual turnover up to Rs. 50 Lakh and the rate of GST applicable for
such supplier would be 6%.(Notification no. 2/2019 – Central Tax db. 07th March 2019)
b) provisions of reverse charge mechanism under sub- section (4) of section 9 of the CGST
Act, 2017 and sub-section (4) of section 5 of the IGST Act, 2017 and sub-section (4) of section
7 of the Union territory Goods and Services Tax Act, 2017 (UTGST Act, 2017) have been
amended for empowering the Government to notify a class of persons who would be liable to
pay tax under reverse charge with respect to specified categories of goods or services or both.
The said provisions were suspended for the CGST Act, IGST Act and the UTGST Act till
30.09.2019 vide notification No. 22/2018- Central Tax (Rate) dated 06.08.2018, 23/2018-
Integrated Tax (Rate) dated 06.08.2018 and 22/2018- Union Territory Tax (Rate) dated
06.08.2018 respectively. However, on 29/03/2019, the government vide notification 7/2019 *
notified specific goods/services like cement/capital goods
c) option for quarterly filing of returns under GST would be introduced for taxpayers having
annual turnover upto Rs 5 crores in the previous financial year. Further, provisions in law
would be amended to introduce a new and simple return filing system. The new formats have
been put in the public domain for stakeholder consultation. The proposed new return filing
system also envisages SMS based filing of a nil return and a single page return per tax period
for certain taxpayers.
d) threshold exemption limit for registration in the States of Assam, Arunachal Pradesh,
Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand is to be increased to Rs. 20 lakhs from
Rs. 10lakhs.
e) allowing taxpayers to opt for multiple registrations for different places of business within
the same State or Union territory.
f) mandatory registration would be required only for those e-commerce operators who are
required to collecttaxatsourceundersection52oftheCGSTAct, 2017.
g) Temporary suspension of registration would be allowed while proceedings of cancellation
of registration are underway
h) registered persons would be allowed to issue consolidated credit/debit notes in respect of
multiple invoices issued in a Financial Year
i) amount of pre-deposit payable for filing of appeal under the CGST Act, 2017 before the
Appellate Authority and the Appellate Tribunal to be capped at Rs. 25 crores and Rs. 50 crores,
respectively.
j) Commissioner to be empowered to extend the time limit for return of inputs and capital sent
on job work, upto a period of one year and two years, respectively.
k) Supply of services to qualify as exports, even if payment is received in Indian Rupees, where
permitted by the RBI

51
 l) place of supply in case of job work of any treatment or process done on goods temporarily
imported into India and then exported without putting them to any other use in India, to be
outside India.
m) scope of input tax credit is being widened, and it would now be made available in respect
of the following:
i) most of the activities or transactions specified in Schedule III;
ii) motor vehicles for transportation of persons having seating capacity of more than thirteen
(including driver), vessels and aircraft;
iii) services of general insurance, repair and maintenance in respect of motor vehicles, vessels
and aircraft on which credit is available; and
iv) goods or services which are obligatory for an employer to provide to its employees, under
any law for the time being inforce.
The recommended amendments have been introduced and passed by the Lok Sabha on
09.08.2018. The same received the assent of the hon’ble President of India and were enacted
on 30.08.2018.These amendments will be made effective when all States pass the SGST Act
amendments in their respective SGST Acts.
In its 29th meeting held on 04.08.2018, it was decided by the GST Council to form a Group
of Ministers (GoM) for MSMEs which would identify the measures to be taken to provide a
conducive environment for the growth of MSMEs after examining the recommendations of the
Law Committee, the Fitment Committee and the IT Committee on the representations and
suggestions relating to the MSME sector received from various stakeholders.

52
LIST OF DECISIONS TAKEN BY GST COUNCIL IN 31ST & 32ND GST
COUNCIL MEETINGS
Press Release
Recommendations made during 31st Meeting of the GST Council
December 22, 2018

The GST Council in its 31st meeting held at New Delhi made the following policy
recommendations:
1. There would be a single cash ledger for each tax head. The modalities for implementation
would be finalised in consultation with GSTN and the Accounting authorities.
2. A scheme of single authority for disbursement of the refund amount sanctioned by either
the Centre or the State tax authorities would be implemented on pilot basis. The modalities for
the same shall be finalized shortly.
3. The new return filing system shall be introduced on a trial basis from 01.04.2019 and on
mandatory basis from 01.07.2019.
4. The due date for furnishing the annual returns in FORM GSTR- 9, FORM GSTR-9A and
reconciliation statement in FORM GSTR-9C for the Financial Year 2017 – 2018 shall be
further extended till 30.06.2019.Status as on the date of publication of this book : (Further
extended to 31st Dec 2019 for F.Y. 2017-18 and 31st Mar 2020 for F.Y. 2018-19 vide
notification 56/2019 – Central tax dt. 14th Nov 2019)
5. The following clarificatory changes, inter-alia, shall be carried out in the
formats/instructions according to which the annual return / reconciliation statement is to be
submitted by the taxpayers:
i. Amendment of headings in the forms to specify that the return in FORM GSTR-9 &FORM
GSTR-9A would be inrespect of supplies etc. ‘made during the year’ and not ‘as declared in
returns filed during the year’;
ii. All returns in FORM GSTR-1 & FORM GSTR-3B have to be filed before filing of FORM
GSTR-9&FORM GSTR-9C;
iii. All returns in FORM GSTR-4 have to be filed before filing of FORM GSTR- 9A;
iv. HSN code may be declared only for those inward supplies whose value independently
accounts for 10% or more of the total value of inward supplies;
v. Additional payments, if any, required to be paid can be done through FORM GST DRC-03
only in cash;
vi. ITC cannot be availed through FORM GSTR-9 & FORM GSTR-9C;
vii. All invoices pertaining to previous FY (irrespective of month in which such invoice is
reported in FORM GSTR-1) would be auto-populated in Table 8 A of FORM GSTR-9;

53
viii.Value of “non-GST supply” shall also include the value of “no supply” and may be reported
in Table 5D, 5E and 5F of FORM GSTR-9;
ix. Verification by tax payer who is uploading reconciliation statement would be included in
FORM GSTR-9C.
6. The due date for furnishing FORM GSTR-8 by e-commerce operators for the months of
October, November and December, 2018 shall be extended till31.01.2019.
7. The due date for submitting FORM GST ITC-04 for the period July 2017 to December 2018
shall be extended till 31.03.2019.
8. ITC in relation to invoices issued by the supplier during FY 2017-18 may be availed by the
recipient till the due date for furnishing of FORM GSTR-3B for the month of March, 2019,
subject to specified conditions.
9. All the supporting documents/invoices in relation to a claim for refund in FORM GST RFD-
01A shall be uploaded electronically on the common portal at the time of filing of the refund
application itself, thereby obviating the need for a taxpayer to physically visit a tax office for
submission of a refund application. GSTN will enable this functionality on the common portal
shortly.
10.The following types of refunds shall also be made available through FORM GST RFD-01A:
i. Refund on account of Assessment / Provisional Assessment /Appeal/Any Other Order;
ii. Tax paid on an intra-State supply which is subsequently held to be inter-State supply and
vice-versa;
iii. Excess payment of Tax; and
iv. Any other refund.
In case of applications for refund in FORM GSTRFD-01A (except those relating to refund of
excess balance in the cash ledger) which are generated on the common portal before the roll
out of the functionality described in point (10) above, and which have not been submitted in
the jurisdictional tax office within 60 days of the generation of ARN, the claimants shall be
sent communications on their registered email ids containing information on where to submit
the said refund applications. If the applications are not submitted within 15 days of the date of
the email, the said refund applications shall be summarily rejected, and the debited amount, if
any, shall be re-credited to the electronic credit ledger of the claimant.
11.One more window for completion of migration process is being allowed. The due date for
the taxpayers who did not file the complete FORM GST REG-26 but received only a
Provisional ID (PID) till 31.12.2017 for furnishing the requisite details to the jurisdictional
nodal officer shall be extended till 31.01.2019. Also, the due date for furnishing FORM GSTR-
3B and FORM GSTR-1 for the period July, 2017 to February, 2019/ quarters July, 2017 to
December, 2018 by such taxpayers shall be extended till31.03.2019.
12.Late fee shall be completely waived for all taxpayers incase FORM GSTR-1, FORM GSTR-
3B &FORM GSTR-4 for the months/quarters July, 2017 to September, 2018, are furnished
after 22.12.2018 but on or before 31.03.2019.

54
13.Tax payers who have not filed the returns for two consecutive tax periods shall be restricted
from generating e-way bills. This provision shall be made effective once GSTN/NIC make
available the required functionality.
14.Clarifications shall be issued on certain refund related matters like refund of ITC
accumulated on account of inverted duty structure, disbursal of refunds within the stipulated
time, time allowed for availment of ITC on invoices, refund of accumulated ITC of
compensation cess etc.
15.Changes made by CGST (Amendment) Act, 2018, IGST (Amendment) Act, 2018, UTGST
(Amendment) Act, 2018 and GST (Compensation to States) Amendment Act, 2018 and the
corresponding changes in SGST Acts has been notified w.e.f.01.02.2019.

55
  CHANGES IN GST RATE

I. GST rate reduction on goods which were attracting GST rate of 28%:
A. 28% to 18%
● Pulleys, transmission shafts and cranks, gear boxes etc., falling under HS Code8483
● Monitors and TVs of upto screen size of 32inches
● Re-treaded or used pneumatic tyres of rubber;
● Power banks of lithium ion batteries. Lithium ion batteries are already at 18%. This
will bring parity in GST rate of power bank and lithium ion battery.
● Digital cameras and video camera recorders
● Video game consoles and other games and sports requisites falling under HS
code9504.

B. 28% to 5%
● Parts and accessories for the carriages for disabled persons

II. GST rate reduction on other goods,

A. 18% to12%
● Cork roughly squared or debagged
● Articles of natural cork
Agglomerated cork

B. 18% to 5%
● Marble rubble

C. 12% to 5%
● Natural cork
● Walking Stick
● Fly ash Blocks

D. 12% to Nil:
● Music Books

E. 5% to Nil

56
 ● Vegetables,(uncooked or cooked by steaming or boiling in water), frozen, branded
and put in a unit container
● Vegetable provisionally preserved (for example by sulphur dioxide gas, in brine, in
sulphur water or in other preservative solutions), but unsuitable in that state for
immediate consumption.

III.GST on solar power generating plant and other renewable energy plants

● GST rate of 5% rate has been prescribed on renewable energy devices & parts for their
manufacture (bio gas plant/solar power based devices, solar power generating system (SGPS)
etc) [falling under chapter 84, 85 or 94 of the Tariff]. Other goods or services used in these
plants attract applicable GST.
● Certain disputes have arisen regarding GST rates where specified goods attracting 5% GST
are supplied along with services of construction etc. and other goods for solar power plant.
● To resolve the dispute the Council has recommended that
inallsuchcases,the70%ofthegrossvalueshallbedeemed as the value of supply of said goods
attracting 5% rate and the remaining portion (30%) of the aggregate value of such EPC contract
shall be deemed as the value of supply of taxable service attracting standard GST rate

Reduction in GST rates/exemptions on services:

● GST rate on cinema tickets above Rs. 100 shall be reduced from 28% to 18% and on cinema
tickets upto Rs. 100 from 18% to12%.
● GST rate on third party insurance premium of goods carrying vehicles shall be reduced from
18% to12%
● Services supplied by banks to Basic Saving Bank Deposit (BSBD) account holders under
Pradhan Mantri Jan Dhan Yojana (PMJDY) shall be exempted.
Air travel of pilgrims by non-scheduled/charter operations, for religious pilgrimage facilitated
by the Government of India under bilateral arrangements shall attract the same rate of GST as
applicable to similar flights in Economy class (i.e. 5% with ITC of input services).
For specific rates of any HSN codes, the gst.gov.in should be referred to.

57
 Press Release
Recommendations made during 32nd Meeting of the GST Council held on 10th
January, 2019
January 10, 2019

The GST Council in its 32nd meeting held at New Delhi gave approval for the following:
Changes made by CGST (Amendment) Act,2018, IGST (Amendment) Act, 2018, UTGST
(Amendment) Act, 2018 and GST(Compensation to States)AmendmentAct,2018alongwith
amendments in CGST Rules, notifications and Circulars issued earlier and the corresponding
changes in SGST Acts would be notified w.e.f.01.02.2019.
The last date for passing the examination for GST Practitioners to be extended till 31.12.2019
for those GST Practitioners who have enrolled under rule 83(1)(b) i.e. who were sales tax
practitioner or tax return preparer under the existing law for a period of not less than five years.

Press Release
Recommendations made during 33rdMeeting of the GST Council held on
24th February, 2019 (Extract)
February 24, 2019

The GST Council in its 33rd meeting held at New Delhi made recommendations for the
following:
GST rate:
i) GST shall be levied at effective GST rate of 5% without ITC on residential
properties outside affordable segment;
ii) GST shall be levied at effective GST of 1% without ITC on affordable housing
properties.
Effective date: The new rate shall become applicable from 1st of April, 2019.

Decisions taken by the GST Council in the 34thmeeting held on 19thMarch,

2019 regarding GST rate on real estate sector (Extract)

GST Council in the 34th meeting held on 19th March, 2019 at New Delhi discussed the
operational details for implementation of the recommendations made by the council in its 33rd
meeting for lower effective GST rate of 1% in case of affordable houses and 5% on construction
of houses other than affordable house.

58
 35th GST Council Meeting, New Delhi
21st June 2019
PRESS RELEASE (Extract)
(Rate related changes)
In the meeting held on 21st June, 2019, the Council has recommended following GST rate
related changes on supply of goods and services.
1. Electric Vehicles
On issues relating to GST concessions on electric vehicle, charger and hiring of electric
vehicle, the Council recommended that the issue be examined in detail by the Fitment
Committee and brought before the Council in the next meeting.
2. Solar Power Generating Systems and Wind Turbines
In terms of order of the Hon’ble High Court of Delhi, GST Council directed that the issue
related to valuation of goods and services in a solar power generating system and wind turbine
be placed before next Fitment Committee. The recommendations of the Fitment Committee
would be placed before the next GST Council meeting.
3. Lottery
(i) Group of Ministers (GoM) on Lottery submitted report to the Council. After deliberations
on the various issues on rate of lottery, the Council recommended that certain issues relating
to taxation (rates and destination principle) would require legal opinion of Learned Attorney
General.
(Law and Procedure related changes)

The GST Council, in its 35th meeting held today at New Delhi, recommended the following:
1. In order to give ample opportunity to taxpayers as well as the system to adapt, the new
return system to be introduced in a phased manner, as described below:

i. Between July, 2019 to September, 2019, the new return system (FORM GST ANX-
1&FORM GST ANX-2 only) to be available for trial for taxpayers. Taxpayers to
continue to file FORM GSTR-1&FORM GSTR-3B as at present

ii. From October, 2019 onwards, FORM GST ANX-1 to be made compulsory. Large
taxpayers (having aggregate turnover of more than Rs. 5 crores in previous year)
to file FORM GST ANX-1 on monthly basis whereas small taxpayers to file first
FORM GST ANX-1 for the quarter October, 2019 to December, 2019 in January,
2020;

59
 iii. For October and November, 2019, large taxpayers to continue to file FORM
GSTR-3B on monthly basis and will file first FORM GST RET-01 for December,
2019 in January, 2020. It may be noted that invoices etc. can be uploaded in FORM
GST ANX-1 on a continuous basis both by large and small taxpayers from October,
2019 onwards. FORM GST ANX-2 may be viewed simultaneously during this
period but no action shall be allowed on such FORM GST ANX-2;

iv. From October, 2019, small taxpayers to stop filing FORM GSTR-3B and to start
filing FORM GST PMT-08. They will file their first FORM GSTRET-01 for the
quarter October, 2019 to December, 2019 in January, 2020;

v. From January, 2020 onwards, FORM GSTR-3B to be completely phased out

2. On account of difficulties being faced by taxpayers in furnishingthe annual returns in FORM

GSTR-9, FORM GSTR9A and reconciliation statement in FORM GSTR-9C, the due date for
furnishing these returns/reconciliation statements to be extended till 31.08.2019
3. To provide sufficient time to the trade and industry to furnish the declaration in FORM GST
ITC-04, relating to job work, the due date for furnishing the said form for the period July, 2017
to June, 2019 to be extended till 31.08.2019
4. Certain amendments to be carried out in the GST laws to implement the decisions of the
GST Council taken in earlier meetings
5. Rule 138E of the CGST rules, pertaining to blocking of e-way bills on non-filing of returns
for two consecutive tax periods, to be brought into effect from 21.08.2019, instead of the earlier
notified date of 21.06.2019
6. Last date for filing of intimation, in FORM GST CMP-02, for availing the option of payment
of tax under notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, to be extended from
30.04.2019 to 31.07.2019 **

60
 36th GST Council Meeting, New Delhi
27th July, 2019
Press Release (Extract)

In the meeting held today, that is 27th July, 2019, the Council has recommended :-
A. Reduction in the GST rate on supply of goods and services :
(1) The GST rate on all electric vehicles be reduced from 12% to 5%.
(2) The GST rate on charger or charging stations for Electric vehicles be reduced from 18% to
5%.
(3) Hiring of electric buses (of carrying capacity of more than 12 passengers) by local
authorities be exempted from GST.
(4) These changes shall become effective from 1 st August, 2019.
B. Changes in GST law:
(1) Last date for filing of intimation, in FORM GST CMP02, for availing the option of
payment of tax under notification No. 2/2019-Central Tax (Rate) dated 07.03.2019 (by
exclusive supplier of services), to be extended from 31.07.2019 to 30.09.2019.
(2) The last date for furnishing statement containing the details of the self-assessed tax in
FORM GST CMP-08 for the quarter April, 2019 to June, 2019 (by taxpayers under
composition scheme), to be extended from 31.07.2019 to 31.08.2019.

61
 Important Changes brought in by the 37th
GST Council meeting

New GST return filing system to be introduced from April 2020

The GST council has again accepted the demand of the industry and postponed the new system
of filing of GST return I the mid of the year. Hope fully this will be implemented from April
2020.

Optional filing of GSTR 9 and waiver from filing of GSTR 9A

Considering the problems being faced by MSME sector , GST council decided to relax the
provisions with regard to filing of specific annual Returns and Composition tax payers are not
required to file GSTR 9A and for other organisations including MSMEs having aggregate
turnover upto Rs two crores , filing of GSTR 9 has been made optional.

Filing of Appeals
Extension of Date was recommended by the council for filing of appeals against orders of
appellate authorities before GST Appellate tribunal

Restriction on availment of ITC in case returns have not been filed by

suppliers
Restriction on availment of Input Tax Credit has been imposed where the GSTR 2A does not
contain the data with regard to availment of ITC.
The new provision i.e. rule 36(4) of CGST Rules reads as follows “Input tax credit to be
availed by a registered person in respect of invoices or debit notes, the details of which have
not been uploaded by the suppliers under sub-section (1) of section 37, shall not exceed 20 per
cent of the eligible credit available in respect of invoices or debit notes, the details of which
have been uploaded by the suppliers under sub-section (1) of section 37.” However, the same
has been challenged in the court of law and notices have been issued to State and Central
Government on 15th Nov 2019. The case is pending with Gujarat High Court.

Refund to be disbursed by single authority

The taxpayer were facing lots of issues in getting the refunds because of multiplicity of
authorities, now the GST council decided to launch an Integrated refund system with disbursal
by single authority which has been introduced from 24th September, 2019.

Linking of Aadhaar with GSTIN nos

To prevent the misuse of GST mechanism, GSTINs may be linked with Aadhaar numbers

62
 37th Meeting of the GST Council, Goa
20 September, 2019
***
PRESS RELEASE
(Law and Procedure related changes)
The GST Council, in its 37th meeting held today at Goa, recommended the following:
1. Relaxation in filing of annual returns for MSMEs for FY 2017-18 and FY 2018-19 as under:
a. waiver of the requirement of filing FORM GSTR-9A for Composition Taxpayers for the said
tax periods; and
b. filing of FORM GSTR-9 for those taxpayers who (are required to file the said return but)
have aggregate turnover up to Rs. 2 crores made optional for the said tax periods.
2. A Committee of Officers to be constituted to examine the simplification of Forms for Annual
Return and reconciliation statement.
3. Extension of last date for filing of appeals against orders of Appellate Authority before the
GST Appellate Tribunal as the Appellate Tribunals are yet not functional.
4. In order to nudge taxpayers to timely file their statement of outward supplies, imposition of
restrictions on availment of input tax credit by the recipients in cases where details of outward
supplies are not furnished by the suppliers in the statement under section 37 of the CGST Act,
2017.
5. New return system now to be introduced from April, 2020 (earlier proposed from October,
2019), in order to give ample opportunity to taxpayers as well as the system to adapt and
accordingly specifying the due date for furnishing of return in FORM GSTR-3B and details of
outward supplies in FORM GSTR-1 for the period October, 2019 - March, 2020.
6. Issuance of circulars for uniformity in application of law across all jurisdictions:
a. procedure to claim refund in FORM GST RFD-01A subsequent to favourable order in
appeal or any other forum;
b. eligibility to file a refund application in FORM GST RFD01A for a period and category
under which a NIL refund application has already been filed; and
c. clarification regarding supply of Information Technology enabled Services (ITeS services)
(in supersession of Circular No. 107/26/2019-GST dated 18.07.2019) being made on own
account or as intermediary.
7. Rescinding of Circular No.105/24/2019-GST dated 28.06.2019, ab-initio, which was issued
in respect of postsales discount.
8. Suitable amendments in CGST Act, UTGST Act, and the corresponding SGST Acts in view
of creation of UTs of Jammu & Kashmir and Ladakh.

63
9. Integrated refund system with disbursal by single authority to be introduced from 24th
September, 2019.
10. In principle decision to link Aadhar with registration of taxpayers under GST and examine
the possibility of making Aadhar mandatory for claiming refunds.
11 .In order to tackle the menace of fake invoices and fraudulent refunds, in principle decision
to prescribe reasonable restrictions on passing of credit by risky taxpayers including risky new
taxpayers
Note: The recommendations of the GST Council have been presented in this release in simple
language only for immediate information of all stakeholders. The same would be given effect
through relevant Circulars/Notifications which alone shall have the force of law.
*****

Press Release
GSTR-9 and GSTR-9C are more simplified
and last dates of submission extended
New Delhi:
The Government has decided to extend the due dates of filing of Form GSTR-9 (Annual
Return) and Form GSTR-9C (Reconciliation Statement) for Financial Year 2017-18 to 31st
December 2019 and for Financial Year 2018-19 to 31st March 2020. The Government has also
decided to simplify these forms by making various fields of these forms as optional.
Central Board of Indirect Taxes & Customs (CBIC) notified the amendments regarding the
simplification of GSTR-9 (Annual Return) and GSTR-9C (Reconciliation Statement) which
interalia allow the taxpayers to not to provide split of input tax credit availed on inputs, input
services and capital goods and to not to provide HSN level information of outputs or inputs,
etc. for the financial year 2017-18 and 2018-19.
CBIC expects that with these changes and the extension of deadlines, all the GST taxpayers
would be able to file their Annual Returns along with Reconciliation Statement for the financial
years 2017-18 and 2018-19 in time. Various representations regarding challenges faced by
taxpayers in filing of GSTR-9 and GSTR-9C were received on which by the Government has
acted in a very responsive manner.
It may be noted that earlier the last date for filing of GSTR-9 and GSTR-9C for Financial Year
2017-18 was 30th November 2019 while that for Financial Year 2018-19 was 31st December
2019. Notifications implementing the decisions as above have been issued today (14th
November 2019).

64
LIST OF RELEVANT GST NOTIFICATIONS FOR MSME SECTOR
Notification no 2/2017 dt 28.06.2017–CGST Rate (rule 138(14)) –
Information to be furnished prior to commencement of movement of goods and generation of
e-way bill
Rule 138(14) - E-way Bill is not required to be generated –
a) where the goods being transported are specified in Annexure;
b) where the goods are being transported by anon-motorised conveyance;
c) where the goods are being transported from the port, airport, air cargo complex and land
customs station to an inland container depot or a container freight station for clearance by
Customs; and
d) in respect of movement of goods within such areas as are notified under clause (d) of sub-
rule (14) of rule 138 of the Goods and Services Tax Rules of the concerned State.
List of goods contained in Annexure–
● Live asses, mules and hinnies
● Live bovine animals
● Live poultry, that is to say, fowls of the species Gallus domesticus, ducks, geese, turkeys
and guinea fowls
● Meat of sheep or goats, fresh, chilled or frozen [other than frozen and put up in unit container]
● Meat of horses, asses, mules or hinnies, fresh, chilled or frozen [other than frozen and put up
in unit container]
● Meat and edible meat offal, salted, in brine, dried or smoked; edible flours and meals of meat
or meat offal, other than put up in unit
● Fish seeds, prawn / shrimp seeds whether or not processed, cured or in frozen state [other
than goods falling under Chapter 3 and attracting2.5%]
● Live fish.
● Fresh milk and pasteurised milk, including separated milk, milk and cream, not concentrated
nor containing added sugar or other sweetening matter, excluding Ultra High Temperature
(UHT)milk
● Human hair, unworked, whether or not washed or scoured; waste of human hair
● Potatoes, fresh or chilled.
● Onions, shallots, garlic, leeks and other alliaceous vegetables, fresh or chilled.
● Cabbages, cauliflowers, kohlrabi, kale and similar edible brassicas, fresh or chilled.

65
There are many more items on this list, Please follow the link to get the entire list
https://docs.ewaybillgst.gov.in/ documents/ EWBRules.pdf

Notification no 08/2017-Integrated Tax dt. 14.09.2017-

With this Notification, Central Government has granted exemption to the persons making inter
– State Supplies of handicraft goods provided that the aggregate value of such supplies, to be
computed on all India basis, does not exceed an amount of twenty lakh rupees in a financial
year, ten lakhs for Special category states.
For the purposes of this notification, the expression “handicraft goods” means the products
mentioned in column (2) of the Table below and the Harmonized System of Nomenclature
(HSN)code mentioned in the corresponding entry in column(3) of the said Table, when made
by the craftsmen predominantly by hand even though some machinery may also be used in the
process:
Sl No. Products HSN Code
1 Leather articles (including bags, 4201, 4202, 4203
purses, saddlery, harness,
garme
2 Carved wood products 4415, 4416
(including boxes, inlay work,
cases, casks)
3 Carved wood products 4419
(including table and kitchenwa
4 Carved wood products 4420
5 Wood turning and lacquer 4421
ware
6 Bamboo products [decorative 46
and utility items]
7 Grass, leaf and reed and fibre 4601, 4602
products, mats, pouches,
wallets
8 Paper mache articles 4823
9 Textile (handloom products) including 50, 58, 62, 63
10 Textiles hand printing 50, 52, 54
11 Zari thread 5605
12 Carpet, rugs and durries 57
13 Textiles hand embroidery 58
14 Theatre costumes 61,62,63
15 Coir products (including mats, 5705, 9404
mattresses)
16 Leather footwear 6403, 6405
17 Carved stone products 6802
(including statues, statuettes,
figures of animals, writing sets,
ashtray, candle stand)
18 Stones inlay work 68
19 Pottery and clay products, 6901,6909, 6911,6912, 6913,
including terracotta 6914

66
 20 Metal table and kitchen ware 7418
(copper, brass ware)
21 Metal statues, images/statues 8306
vases, urns and crosses of the
type used for decoration of
metals of chapters 73 and 74
22 Metal bidriware 8306
23 Musical instruments 92
24 Horn and bone products 96
25 Conch shell crafts 96
26 Bamboo furniture, cane/Rattan
furniture
27 Dolls and toys 9503
28 Folk paintings, madhubani, 97
patchitra, Rajasthani miniature

Notification no. 32/2017 - Central Tax, dt. 15.09. 2017 –

GST Seeks to granting exemption to a casual taxable person making taxable supplies of
handicraft goods from the requirement to obtain registration.
The Central Government, on the recommendations of the Council, hereby specifies the casual
taxable persons making taxable supplies of handicraft goods as the category of persons
exempted from obtaining registration under the aforesaid Act.
Provided that the aggregate value of such supplies, to be computed on all India basis, does not
exceed an amount of twenty lakh rupees in a financial year, ten lakhs for Special category
states.
The casual taxable persons mentioned in the preceding paragraph shall obtain a Permanent
Account Number and generate an e-way bill in accordance with the provisions of rule 138 of
the Central Goods and Services Tax Rules,2017.

Notification No. 38/2017-Central Tax Rate, dt. 13.10.2017-

Amendment in Section 9 (4) of CGST Act – Reverse Charge Mechanism in case of intra-State
supplies of goods or services or both received by a registered person from any supplier, who is
not registered, from the whole of the central tax exceeds five thousand rupees in a day.
This particular provision has been omitted and shall not be applicable. (Notification no
56/2018 Central Tax date on 23rd October, 2018, GST)

Notification No. 57/2017 – Central Tax, dt. 15.11.2017 –

Quarterly furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of upto
Rs.1.5 crore in the preceding financial year or the current financial year

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Notification No. 2/2019–Central Tax, dt. 07.03.2019 (Extract)
The central tax, on the intra-State supply of goods or services or both as specified - “First
supplies of goods or services or both upto an aggregate turnover of fifty lakh rupees made on
or after the 1st day of April in any financial year, by a registered person”, shall be levied at the
rate specified in the corresponding entry in column (2) of the table, subject to the conditions as
specified in the corresponding entry in column (3) of the table provided in the notification.

Notification No.10/2019–Central Tax, dt. 07.03.2019 (Extract)

Any person, who is engaged in exclusive supply of goods and whose aggregate turnover in the
financial year does not exceed forty lakh rupees, except,
a) persons required to take compulsory registration under section 24 of the said Act;
b) persons engaged in making intra-State supplies in the States of Arunachal Pradesh, Manipur,
Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand; and
c) persons exercising option under the provisions of sub-section
(3) of section 25, or such registered persons who intend to continue with their
registration under the said Act.
d) Ice cream, pan masala and tobacco manufacturers

Notification No.14/2019–Central Tax, dt. 07.03.2019 (Extract)

A registered taxable person, whose aggregate turnover does not exceed Rs.1.50 Crore, as a
supplier of goods (Rs. 75 Lakh for Arunachal Pradesh, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura and Uttarakhand) in the preceding financial year may opt for this
scheme.
Ice cream, pan masala and tobacco manufacturers cannot opt for the GST composition levy
scheme.

Notification No.56/2019–Central Tax, dt. 14.11.2019 (Extract)

Filing of GST Annual return and GST Audit reports has been a major cause of concern for the
industry because of lack of awareness about the various tables and data to be submitted and
certain problems in the GST system. Conceding the demand of the trade and industry, the
ministry has issued a notification no 56/2019 on 14th Nov 2019 wherein not only the date of
filing of GSTR 9 and GSTR 9c for the year 2017-18 has been extended but also the date for
filing of GSTR 9 and GSTR 9C has been fixed as 31/03/2020. Also the assesses have been
given the option to fill some of the tables not all the tables at their discretion. Details are given
below. However, the readers are advised to go through the full notification along with related
notifications to have a holistic view of the amendments.

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 Major changes in Form GSTR 9
Suitable Amendment for FY 2018-19 wherever there is reference for FY 2017-18 For
2018-19 ,GSTR - 2A As on 1.11.2019 will be auto populated
Table Particular Relaxation
4B to 4E Outward Taxable Supply Option to fill net of cr./dr.
notes & amendment
5D, 5E & 5F Exempt, Nil Rated, Non Option to fill all in "Ex-
GST empt"
5A to 5F Outward Supply on which Option to fill net of cr./dr.
tax is not paid notes & amendment
6A to 6E Bifurcation of Input Credit Option to fill all Credit in
"Input" Only
6C to 6D RCM ITC Option to fill detail of both
in Table 6D only
7A to 7H Credit Reversal Except reversal pertaining to
Tran- 1(7F) & Tran 2 (7G)
option to fill all details in
Table 7H only
8A to 8D Detail of ITC Option to upload details of
these tables in pdf format in
GSTR 9c
12 & 13 Amendments in next year Optional
15A to 15 D Detail of Refund Optional
15E to 15 G Detail of Demand Optional
16A Supplies received from Optional
Composition Taxpayer
16B Deemed Supplies from Optional
principal to job worker
16C Deemed supplies for goods Optional
which were sent approval
basis
17 HSN wise details of outward Optional
supplies
18 HSN wise details of inward Optional
supplies

69
MAJOR CHANGES IN GSTR 9C
In part- B Certification words ‘True & Fair’’ are substituted for the words “True & Correct” Cash flow
statements to be reported only if available Other simplification/relaxations for FY 2017-18 & 2018-
19
Table Particular Relaxation
5B to 5N Various adustment for Optional, make adjustment in
reconciliation between Table 5O
Turnover as per Audited
Financial Statements & GST
Turnover
12B ITC booked in earlier FY but Optional
availed in Current FY
12C ITC booked in earlier FY but not Optional
availed
14 Expense wise ITC Recon Optional

70
  CMAS TO ASSIST MSMES IN GST RELATED COMPLIANCES
AND AS GST AUDITOR

Institute of Cost Accountants of India has conducted hundreds of seminars/sessions for its
members to train them so that the Cost and Management Accountants can assess the impact of
GST and help MSMEs to comply with the provisions under various Acts concerning GST.
Cost and management Accountants have been trained by the Institute to lend a helping hand
to MSMEs to ensure that the profitability of the organizations remain intact by bringing in
various cost management techniques coupled with the GST provisions. CMAs are already
helping MSMEs as GST consultants and GST auditors.
The list of practicing CMAs across India who can help the MSMEs in GST related issues is
given at
https://eicmai.in/External/Home.aspx

Practicing Members
The Institute of Cost Accountants of India is also organizing GLOBAL SUMMIT 2020
“MISSION 5 TRILLION - CMA AS A CRYOGENIC FORCE” on 9th January 2020 to 11th
January 2020 at New Delhi and it needs mention that MSMEs have a greater role to play to
accomplish Mission 5 Trillion. GST implementation has brought in a discipline among the
industry and instances of unhealthy competition are on decline because of the implementation
of GST and MSMEs are going to be the beneficiaries in the long run.

71
  Positive Impact of GST:

Starting business becomes easier:

Currently, the Sales Tax department has various turnover slabs which require VAT registration.
A business with multi-state operation in this case has to follow varied tax rules applicable to
different states. This not only creates excess complication but also adds to procedural fees, due
to which the price sensitive MSMEs will be burdened. Uniform GST will standardize the
process.

Improved MSME market expansion:

In the current system, big corporations procured goods based on MSME's locality in order to
reduce overheads. Thus MSMEs limit their customers within state as they wi" bear the ultimate
burden of tax on interstate sales, reducing their customer base. With implementation of GST,
this will be nullified as tax credit will transfer irrespective of location of buyer and seller. This
allows MSME segment to expand their reach across borders.

Lower logistical overheads:

As GST is tax neutral it will eliminate time consuming border tax procedures and toll check
posts and encourage supply of goods across borders. Accordingly the logistical cost for
companies manufacturing bulk good will be reduced. Such costs can be crucial for the survival
of MSMEs.

Aids MSMEs dealing in sales and services:

GST will not distinguish between ·sales and services. This is good news for the MSMEs that
deal with sales and services model of business, for them the taxation is simplified and will be
calculated on total.

Unified market:
GST will allow flexibility in transfer of goods across states and reduce the cost of doing
business, as the reform will cut down multiple taxes imposed by state and central government.

72
Purchase of Capital Goods:
In the current system, only 50% of the input tax credit against purchase of Capital Goods is
available in the year of purchase and the balance amount in subsequent years. Under GST
regime, entire amount of input tax credit can be availed in the year of purchase itself. This will
support "Make in India" campaign.

Reduction of tax burden on new business:

As per the current tax structure, businesses with a turnover of more than rupees 5 lakh need to
pay a VAT registration fee. The government mulls the exemption limit under GST to twenty
five lakh giving relief to over 60% of small dealers and traders.

Improved logistics and faster delivery of services:

Under the GST bill, no entry tax will be charged for goods manufactured or sold in any part of
India. As a result, delivery of goods at interstate points and toll check posts will be
expedited.According to an estimate by CRISIL, the logistics cost for manufacturers of bulk
goods will get reduced significantly—by about 20%. This is expected to boost ecommerce
across the nation.

Elimination of distinction between goods and services:

GST ensures that there is no ambiguity between goods and services. This will simplify various
legal proceedings related to the packaged products. As a result, there will no longer be a
distinction between the material and the service component, which will greatly reduce tax
evasion.

73
  NEGATIVE IMPACT OF GST

The burden of lower threshold:

The GST bill proposes a reduction in threshold to be Rs. 9 lakh to increase the tax net, Rs.
41akh for North Eastern states. (However, GST council has increased the threshold limit from
10 lakh to 20 lakh and from 41akh to 10 lakh for North eastern states) Under the reform, any
service provider or retailer wi!! be subject to tax levy. In the current central excise law threshold
is Rs.1.5 crore. This reduction will significantly impact the MSMEs' working capital. For
example, a manufacturer who trades today at Rs. 25 lakhs without any tax levy will be expected
to pay GST post implementation. As the threshold is low, most MSMEs are now exempted and
will have to pay a chunk of their capital towards tax in future.

No tax differentiation for luxury items and services:

The tax neutrality will not differentiate luxury goods and normal goods. Currently the state and
central government levy higher taxes on luxury goods and services. Under GST
implementation, all goods and services will have to pay the same tax which will lead to rich
becoming richer and poor becoming poorer. It is not an ideal situation for MSMEs competing
against large businesses.

Selective tax levying:

GST will not be applicable to Alcoholic liquor for human consumption and Petroleum based
businesses, which creates further gap and does not support the unified market' ideology of GST.

The burden of higher tax rate for Service Provider:

Presently Service Tax rate is 15%. GST rate will be around 18%. The scenario in the service
sector will further be impacted as the concept of Centralised Registration has been done away
with and each unit in different states will have to take separate registration. Thus even if
services are supplied by company's one Unit in State A to another Unit in State B , then also
taxes will be payable.

74
Excess Working Capital Requirement –
Taxation of stock transfer will primarily impact the working capital requirements. The quantum
of impact will vary depending on stock turnaround time at warehouse, credit cycle to customer,
quantum of stock transfer, etc. Higher amount of Capital Requirement Jill increase interest cost
which ultimately will increase the price of Finished Goods. Realignment of Purchase and
Supply Chain – Under GST credit will be not be available to a compliant company if the vendor
from whom MSME is purchasing goods does not show the same in his return. Thus sourcing
strategies will change on account of GST credit mechanism. Also there will be reconsideration
of Supply Chain on account of taxation of Stock Transfers.

Registration will be mandatory for e-commerce suppliers and operators

Businesses carrying out activities related to e-commerce should register under GST irrespective
of their annual turnover rate. Unlike other types of businesses, ecommerce firms will not be
eligible for threshold exemptions or for the Composition Scheme (which allows firms to file
their tax returns on a quarterly basis instead of 3 times a year and pay taxes at a much lower
rate). Also, e-commerce firms should register for GST in every single state where they supply
goods.

Cost of tax compliance is likely to increase

As mentioned above, consistently filing 3 returns a month, periodically reconciling your
transactions, and uploading invoices regularly will give rise to the need for an accountant with
technical expertise. Hiring an accountant and paying them, adds to the burden on small
businesses. It’s tedious to maintain separate books of accounts for every state involved in the
supply of goods/services and assess the records of various entities involved in every single
transaction. To cope with the system, small businesses might use the services of licensed third
parties that help firms comply with the GST regime. For this convenience, small businesses
will have to dish out a sum ranging from Rs.1000-Rs.5000, depending on the kind of service
that is rendered to them.

Multiple registrations for Pan- India Businesses

Under the new regime, a business will have to register online for GST in every state involved
in its sales process. If your business delivers goods across 5 states, then you’ll have to register
for GST in those 5 states to carry out your business activities. Since the entire registration
process takes place online, small business owners who are not used to working online might
not find the transition easy.

75
Returns must be filed on a monthly basis
Under GST, there will be around 36 returns in a fiscal year. GST returns will also require you
to close your books on a monthly basis, which, realistically, will take a lot of time. The time
that business owners spend filing these returns could instead be spent on other productive
activities, like developing their business and acquiring clients.
To top it off, until you’ve filed the relevant returns, you cannot claim refunds and your
customers cannot claim tax credit for the goods they bought from you. Should you miss a single
return, you’ll be penalized and your compliance rating on the GSTN portal will be reduced.

76
COST STRUCTURE POST GST
Majority of industries which are manufacturing medicine and car parts and AC parts reported
a significant increase in their overall cost structure since the introduction of GST in July 2017.
However, 25 percent industries reported no increase in overall cost structure post July 2017.
These industries are engaged in the manufacturing of herbal medicines and cosmetics.

EFFECT OF GST IN INPUT COST

A large number of industries reported an increase in the input and raw material cost following
the implementation of GST (allopathic medicine and car parts ). Industries that manufacture
AC parts reported negligible effects on their input cost. Interestingly, 5 industries that are
manufacturing herbal based cosmetics even reported a decrease in the input raw material cost.
The variation in the impact on the input cost of the various industries can be attributed to the
different sources of input and raw material.
One input cost that has gone down for all industries is the cost of transportation of raw material
from their source to the manufacturing point. Because of the implementation of GST , the
movement of goods has become faster , more efficient and cheaper . Due to the elimination of
sale tax barriers at the borders of states 83.66% reported a fall in their transportation cost
because they are purchasing their raw material from other states.

EFFECT OF GST ON THE VOLUME OF SALES

All the industries surveyed confirmed the absence of any adverse effects on their volume of
sale following GST.

EFFECTS OF GST ON THE REVENUES OF FIRMS

The actual effects of this policy can be judged by the impact on the revenue of the industries.
Half of the respondents report that there has been a considerable increase in their revenues .
Very few of the industries show adverse or neutral effects on their revenues.

FILING OF RETURNS BY SMALL AND MEDIUM FIRMS

Nearly all the firms file GST returns thrice a month as per the prevailing norms under GST.
As the entire process is detailed, time consuming and elaborate, nearly 90% of the firms
reported that they have hired professional help for filing these returns which entails an extra
cost for them. However, over the last four months, the system of filing returns has become
absolutely clear to 94% of the firms with only 6 % of the firms reporting lack of clarity on
certain aspects.
Nearly 85% of the firms reported difficulties pertaining to the online filing system with issues
such as software crash, no immediate uploading of data, many technical errors associated with
the GST portal etc. The glitches in the GST portal and the absence of offline support systems
make the whole process cumbersome and tardy.

77
CHAPTER NO. 5: CONCLUSIONS AND SUGGESTIONS

 FINDINGS OF THE STUDY

The structured questionnaire was prepared with the responses as yes or no. 30 respondent filled
the questionnaire. The responses were analysed using percentage. Here 90% of the enterprises
agreed that GST implementation was a good step by the Government. This has reduced the
compliance under various law and now the enterprises are required to follow one law. The
online registration process was simple for 70% of the respondents. 40% mentioned that GST
has made the tax payment easy for their business. They are required not to go personally for
payment of tax. Online payment can be made. 80% believes that being everything online the
compliance burden has increased and moreover the site does not support at the peak periods.
Non-compliance leads to heavy fines and penalties. Only 13% stated that GST will help in the
growth of new enterprises, 57% stated that after implementation of GST there was growth in
business transaction, 50% says that because of online system of return filing there is ease in
return filing. 33% agreed that after GST there was increase in sales and profit whereas majority
believed that implementation of GST has hampered their business. Others stated that after GST
they were unable to purchase from registered dealer if the purchaser is unregistered. 80% stated
that after GST the working capital requirement increase in the GST regime as they have to pay
GST without recovering from the customer. Levy is at the point of supply. This has raised the
requirement of working capital. 43% stated that there is loss of liquidity because you are
required to pay tax immediately
87% agreed that being everything online the dependency on technology has increased. The
respondents who were not technosavy felt handicapped and were required to depend on
professionals for every small thing. 50% felt that it has increased the tax burden with lower
turnover. 47% said that it has lowered their transportation expenses. Only 40% agreed that
sufficient training was provided to cope up with new reforms under GST.

78
 SUGGESTIONS

 The respondents suggested that professional institutes should be involved in training

the owners so that their dependency on professionals is reduced. They also suggested
that it should be the regular feature.

 They were of the opinion that the time extensions for filing return was made at very last
movements which should be announced in advance to reduce stress to the owners.

 They suggested that a mechanism for immediate credit should be developed which will
help MSMEs in regulating their cahflow and monitor their working capital.

 The major suggestion was relating the site which creates problem during return filing
dates. It should be develop in a manner that it reduces compliance timings.

 Since GST is still under the improvisation mode, care should be taken that MSMEs
representation should be considered while making amendments.

 Constant monitoring and course correction in the implementation of GST is absolutely

essential in the infancy of this new taxation regime , especially with reference to the
small scale sector which hitherto has been mainly a part of the unorganized and
informal economy.

 The existing GST slabs need to be simplified and rationalized. They should be more
relevant to the ground reality of India.

 The threshold limit of Rs 20 lakh is low and needs to be suitably revised upward.

 The benefits arising from the efficient and low cost transportation should be maximized.

 The state government should be more proactive in dealing with problems arising from
the system. For instance, Authority of Advance Ruling (AAR) should be immediately
set up in Uttarakhand . Also the State Revenue department needs to interact more with
the local businesses and entrepreneurs to solve the teething troubles.

79
 Filing of the GST returns should be made simple and user friendly .For small
businesses, the requirement of filling forms should be made simpler. For example -:
there is a huge traffic of “NIL” returns .This should have nothing more than a single
page form like the one for Income Tax Returns.

 Certain relaxations should be given to micro and small enterprises under GST regime
in the less developed states like Uttarakhand.

 Under the ambit of Corporate Social Responsibility (CSR), it could be made statutory
(legal) for big business houses to provide all necessary support to the micro, small and
medium enterprises for the GST compliance.

80
  SUMMARY, CONCLUSIONS AND POLICY IMPLICATIONS

Goods and Services Tax is an indirect tax levied on supply of goods and services in the
economy. Its implementation is one of the biggest tax reforms in India. The comprehensive tax
structure affected all the sectors to varied extent. SMis being one of the most dynamic and
vibrant sector has been impacted by GST implementation. The study tends to understand the
impact of GST on SSI's business using primary data collection at Peenya industrial area in
Bangalore (urban) district of Karnataka.
Some of the major findings were that the prices of the products have decreased post GST,
average monthly sales and tax compliance has increased to a certain extent. Input Tax Credit
method has been preferred by all rather than composition scheme, the opinion about Reverse
Charge Mechanism is negative, there has been no decrease in the overall cost of doing business,
taxation of stock transfers is not burdening the industries, industries are experiencing a burden
of dual administration under GST, SSI's in Karnataka want the definition of job work and
labour work to be separated, the e-way bill system has delivered upon its objectives of
transparency but other problems have creeped in. There has been an expansion in inter-state
sales post GST, a lower threshold on tax exemption has not burdened the industries, industries
are not facing any serious portal, technical or procedural issues with respect to GST, ease of
doing business has greatly improved and the present state of economic conditions has
neutralised or reversed the benefits of GST. Thus this leads us to infer some policy
implications.
The entire GST regime must be stabilized; confusions must be cleared so that the industries
can better avail the benefits of GST. The Reverse Charge Mechanism and Composition Scheme
must be revamped or reformed to suitably attract the industries. More awareness programmes
must be conducted continuously as long as there are continued changes in GST. Further at the
macro level, economic policies should be designed in such a way as to improve the performance
of the MSME's. This study has its own limitations of area, sample, time and response and hence
future works can overcome these limitations and investigate into various other components of
GST.

81
POLICY IMPLICATIONS

 GST can have huge implications on the MSME sector where more than 90% of the
businesses consist of partnership and proprietorship firms. The objective of plugging
the informal economy into formal setup will have some benefits but it may have a heavy
cost as well if done forcefully and not properly implemented.

 The current rate structure is too complicated and may lead to confusions , corruption,
and litigation .

 Presently, the lower exemption threshold of Rs 20 lakhs coupled with cumbersome

compliance can prove to be counter- productive and push small businesses towards new
ways of tax evasion.

 The removal of taxes on the interstate movement of goods such as sales tax , octroi, etc.
under this single tax system has made transportation efficient, cheap and quick, thereby
vastly reducing freight and transportation costs for the sector under study.

 GST provides an option to an assesse to approach the Authority for Advances Ruling
(AAR) in case of any confusion with respect to the determination of taxation liabilities
to help them in planning activities with certainty. However, AAR is yet be constituted
by the state government.

 One major problem under GST system is the cumbersome and complicated procedure
for filing returns under this system, such as too many returns to be filed, complicated
and detailed form, lot of technical issues associated with the working of GST online
portal and the absence of offline support system.

 The basis of the creation of taxation slab is not very clear or rational.

82
  CONCLUSION

GST is one of the biggest tax reforms since independence. It has combined various indirect tax
under one act with a view of bringing uniformity in the form of “One Nation One Tax”.
However to make it acceptable to everyone it is important that everyone’s representation is
considered. It should consider the problems of MSMEs and make it convenient for them to
accept it as the regular business feature rather than a compulsion on compliance. It is necessary
that GST’s effect on economy to be scrutinized in totality to reach a widely accepted
conclusion.
Several policy interventions along with technology and innovation will continue to play vital
role in creating a business-friendly atmosphere for the SMEs. No doubt that GST is aimed to
increase the taxpayer base, majorly SMEs into its scope and will put a burden of compliance
and associated costs to them. But in the long run, GST will turn these SMEs more competitive
with a level playing field between large enterprises and them. In fact, recently government has
also formed a special committee to look after the issues faced by MSME sector in GST. It is
urged to the industry that they proactively highlight the above issues and obtain the relief prior
to advent of GST as once GST is implemented; the chances of respite would be very minimal
for the sector. Furthermore, these Indian SMEs would be able to compete with foreign
competition coming from cheap cost centers such as China, Philippines and Bangladesh.
After a thorough analysis of the above literature it can be concluded that GST will provide
relief to producers and consumers by subsuming the several indirect taxes in India. The Study
of literature indicates that the implementation of Goods and Services Tax helps in better
utilization of resources and makes the taxation system environment friendly. The taxes for both
Centre and States will be collected at the point of sale. Both will be charged on the
manufacturing cost. Individuals will be benefited by this as prices are likely to go down. The
lower price of goods increases consumption and more consumption leads to higher production
thereby leading to economic growth and development of the country.
Taxation system is very important for the economy because they maintain equity in income
group. In context of India, second high tax rate in the world and its devastating impact on poor
people , Consumption and productions of goods and services are undeniably rising and because
of multiplicity of taxes in current tax system, organization complexities and conformity cost is
also increasing. At present Indian economy requires a major change in the taxation system.

83
  REFERENCES

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