Industry is estimated to contribute $280 billion to India’s gross domestic product by 2026 as a positive fall-out of the Goods and Services Tax, says a report titled ‘Emerging Mantras for Bankers-Borrowers’.

A joint report, prepared by industry chamber Assocham-Ashvin Parekh Advisory Services cites that GST will benefit micro, small and medium enterprises (MSMEs) by bringing in many positives, such as easy process of availing input credit, elimination of cascading tax system and less logistical overheads.

According to the chamber, GST would boost economic growth but the extent of such an impact will depend on a favourable consensus on tax rates for all business segments and integrated implementation of the same. However, the report said GST would also cause short-term hiccups, such as increase in the cost of products, realignment of purchase and supply chain and high compliance burden to MSMEs.

Industries in MSME sector such as online retail, logistics, manufacturing and textiles would have a larger impact, the report said.

Competition

Eventually, GST will turn Indian MSMEs more competitive with foreign competition coming from cheap cost centres such as China, the Philippines and Bangladesh, the report added.

The Insolvency and Bankruptcy Code would be a boon to MSMEs who have limited power to endure the distress in addition to ensuring transparency through court administered process, the report noted.

This new code will also enable more lenders with softer terms to enter the market and so MSMEs will get a better flow of funding to their business, the report added.

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