₹75-lakh threshold could help over 60 lakh MSMEs escape GST net

Shishir Sinha New Delhi | Updated on December 31, 2018

At its preliminary meeting in Bengaluru on Monday, the Southern Committee flagged many issues plaguing the MSME sector   -  The Hindu

May cost exchequer ₹5,500 cr, but will boost small units by cutting compliance cost

Over 60 lakh assessees may come out from the Goods and Services Tax (GST) net if the threshold for micro, small and medium enterprises (MSMEs) is raised to ₹75 lakh. A panel led by Minister of State for Finance Shiv Pratap Shukla will meet on January 10 to finalise the recommendations in this regard.

“A higher threshold may result in a GST revenue loss of around ₹5,500 crore,” a senior government official told BusinessLine. But this will unshackle the MSMEs from various complexities and bring down their compliance cost.


Finance Minister Arun Jaitley has already made it clear that the recommendations of the panel will be taken up during the next meeting of the GST Council, which is likely to take place by the third week of January. As of now, the threshold for mandatory registration under the GST is ₹20 lakh (₹10 lakh for some north-eastern and hilly states).

As on December 13, a total of 57,55,610 MSMEs were registered on the Udyog Aadhaar (UA) portal. Also, as per the 73rd round of the National Sample Survey (NSS) conducted by the National Sample Survey Office, the Ministry of Statistics & Programme Implementation, during 2015-16, there were 633.88 lakh unincorporated non-agriculture MSMEs in the country. These units are defined on the basis of investment made. There are two sets of definitions, depending on whether the units produce goods or services. Under the goods category, the slabs are: up to ₹25 lakh – micro; ₹25 lakh to ₹5 crore – small; and ₹5-10 crore – medium. In the case of services, the slabs are: up to ₹10 lakh, ₹10 lakh to ₹2 crore and ₹2-5 crore.

There is a feeling that despite many concessions given since July 1, 2017, the MSME sector has continued to feel the pinch. In a letter to the Finance Minister Arun Jaitley, Manpreet Badal, Finance Minister of Punjab, said the cost of compliance should not be higher than a specified threshold of the net cash GST liabilities or average net profits.

“Personally, I feel, that the cost of compliance should not exceed 5 per cent of the net cash liability for an MSME unit with a turnover up to ₹5 crore,” he said, while adding that for a composition dealer with a turnover up to ₹1 crore, the cost of compliance should be less than ₹6,000 per annum. In fact, most dealers should be able to comply on their own without availing any external help, he said.

Tax experts also feel that the compliance cost should be lowered and the threshold should be raised. Rajat Mohan, Partner at AMRG & Associates, said that the MSME sector is a pillar of the Indian economy, contributing about 45 per cent to manufacturing output and about 40 per cent of exports. In the last one year, the sector is on a downward spiral due to high compliance cost imposed by the rigours of the GST.

“A low threshold of ₹20 lakh is virtually dragging the MSMEs out of their comfort zone and harnessing them for an unknown GST battle without realising that the weight of the harness is sufficient enough to suffocate them,” he said.

Published on December 31, 2018

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