Anxious MSMEs brace for rollout of GST regime

MUMBAI: While the GST is expected to create a unified and simple tax system, many of the small and medium enterprises are anxious over their preparedness to usher into the GST regime. There are also concerns regarding business shifting towards more organised players since the new tax system will widen the tax base by bringing even the unorganised players into the tax net there by removing the tax arbitrage between unorganised and organised players.

This along with mild increase in compliance cost is likely to put pressure on the margins of smaller entities. “There will be lot of hardships in the initial months. Our interaction with a large number of small and medium enterprises across the country showed that they are very much anxious about the new system. There is a lack of clarity among them on what to do, how to get registration, how to claim input tax credit, what to do with their existing stocks and how to price their product among others,” said Archit Gupta, founder and CEO, Cleartax.

To start with, entities providing goods and services are required to get themselves registered with the GST portal that will enable them to issue GST compliant invoices. At every level, traders will have to register invoices to claim input tax credits. The entire process will be online, facilitated by an IT infrastructure.

“In the new regime, the shift of trade from unorganised to organised sector is expected to accelerate as GST will eliminate or reduce the tax arbitrage and advantages currently enjoyed by unorganised players. The dip in transit time due to elimination of multiple check points and consolidation of warehouses will significantly prune logistics costs. This will equip pan-India organised players to fend-off competition from regional unorganised players who enjoy lower logistics cost advantage,” Edelweiss Financial Services analysts said.