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MSMEs seek liberal GST norms for smoother transition to online selling

MSMEs have claimed that GST Act imposes higher tax rate and compliance burden for businesses selling online, thus preventing them from swiftly transitioning to online platforms

Nirbhay Kumar | October 1, 2020 | Updated 21:04 IST
MSMEs seek liberal GST norms for smoother transition to online selling

KEY HIGHLIGHTS

  • MSMEs have demanded GST compliance parity between offline and online sellers, claiming the new indirect tax regime is taxing for the firms switching over to online platforms
  • Post COVID, due to lockdowns and disruptions, smaller players and artisans are trying to sell their goods online
  • MSMEs' demand assumes significance given that festive season is round the corner and customers are fast shifting to online in the wake of COVID-19 pandemic
  • The industry has pitched for a range of changes for online sellers from registration to composition scheme to tax collected at source (TCS)

Terming the GST compliance burden as taxing for micro, small and medium enterprises making shift to online selling platform, industry players have urged the government to ease the rules.

They have claimed that regulations prescribed in the GST Act for businesses selling online impose a higher tax rate and compliance burden in comparison to businesses selling offline thus preventing MSMEs to swiftly make a transition to online platforms.

ALSO READ: Allow cash flow-based lending for MSMEs: industry body to RBI

Post COVID, due to lockdowns and disruptions, smaller players and artisans are trying to sell their goods online.

"The need of the hour is to encourage and enable smaller players affected and uprooted by the COVID pandemic and not make their life more difficult," said Animesh Saxena, President of Federation of Indian Micro and Small & Medium Enterprises (FISME).

The industry has pitched for a range of changes for online sellers from registration to composition scheme to tax collected at source (TCS). The sector experts have claimed that various barriers are discouraging offline players to start selling online.

Tax experts suggested to do away with mandatory GST registration requirement for online selling. They also sought to reduce compliance burden due to imposition of TCS.

ALSO READ: MSMEs bat for opening payment dispute councils to medium enterprises

The demand assumes significance given that festive season is round the corner and customers are fast shifting to online due to the need for social distancing in the wake of pandemic.

"The GST policy on e-commerce needs to be completely reviewed as a successful tax policy needs to ke    ep pace with technology, particularly when business is facing an unprecedented challenge like we are witnessing at present. The current GST framework provides impediments in selling online, especially for MSMEs," said Kunal Wadhwa, Partner (Indirect Tax) PwC at a webinar.

While listing out various challenges faced by the MSME sector, the experts participating in the webinar noted that removing regulatory bottlenecks would not just encourage new and emerging players but also help the larger industry streamline their businesses towards revival.

"It is imperative that policy reforms specifically target easing the process of digitalisation for MSMEs," said tax expert Vidushi Gupta.

The pandemic has severely disrupted the 60 million strong MSME sector in India that employs over 110 million people, considered the largest after farm sector.

ALSO READ: Centre says no data available on number of startups, MSMEs closed during COVID-19 lockdown

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