I am very hopeful we would get GST exemption for khadi: Kalraj Mishra

In a Q&A, he also says problems under GST are transitory and it will be beneficial in long run

Micro, small and medium enterprises (MSME) Minister Kalraj Mishra says problems under goods and services tax (GST) are transitory and the tax regime will be highly beneficial for the sector in the long run, in a talk with Sanjeeb Mukherjee. Edited excerpts:

While organised MSMEs might comply with GST, the unorganised ones are finding it difficult, more so as they dealt largely in cash. Is this a correct analysis?

The worries of MSMEs are mainly transitory and will gradually go away. The Centre is well aware of these problems and is doing all possible things to help in this phase. It might seem their final product is being taxed at a higher rate in some cases but when they take into account the input credit on many raw materials they use, the net tax burden on them will be either the same as before or marginally more. But, to get the benefit of input credit, they have to get registered.

My ministry is undertaking an extensive hand-holding exercise with MSMEs to make this transition smooth. We have started a GST-MSME link on the ministry’s website, besides a GST facilitation cell. A special cell has been started in Hyderabad to train our officers and entrepreneurs on various nuances of GST. All field units of the ministry have been asked to organise workshops on GST.

It is believed that unorganised MSMEs will face a severe resource crunch with the threshold of exemption reduced to Rs 20 lakh, from Rs 1.5 crore for goods under value-added tax.

My ministry is fully aware of its obligations towards MSMEs. A composition scheme has been provided for small businesses. Any eligible registered entity (other than in special category states, excluding Uttarakhand) can avail of the benefits, barring those manufacturing ice-cream, pan masala and tobacco products. They need to pay an amount equal to two per cent of their turnover to the state in the case of a manufacturer and one per cent if a trader or dealer. The (annual) turnover limit for availing of the composition levy was earlier kept at Rs 50 lakh but later enhanced to Rs 75 lakh, keeping in view the interests of small businesses.

Have you approached the finance ministry to exempt khadi from GST? What has been the response? Will it go to the GST Council?

The GST Council has already started analysing the pros and cons. The finance minister (Arun Jaitley) has assured of GST exemption, for the financial development of economically backward khadi weavers and spinners. I’m very hopeful that we would get this relief in the next few meetings of the Council.

What makes you so confident about khadi getting exemption when the government has refused to alter rates for the overall textile sector?

Khadi not only has an economic implication but a significant emotional factor for all Indians, taking us back to Mahatma Gandhi and the Swadeshi movement.

Critics say jobs have not been growing under the Modi government. This also means manufacturing is not growing. What is the status of jobs in the MSME sector?

I do not think jobs are not growing. My ministry is implementing various schemes which are providing impetus to manufacturing and creation of jobs. All of them will have positive outcomes.

There is a very common belief that demonetisation led to huge job losses in the MSME sector, not captured due to lack of data on the sector. What is the situation now?

Initially, yes, I do agree that demonetisation might have affected small industries and there could have been some job loss. However, as the process of remonetisation gathered pace, the situation improved dramatically and people returned to their jobs. If you look at any data on manufacturing, most show MSMEs are indeed doing better than many other sectors.

MSMEs complain they faced one disruption after another — demonetisation, digitisation and now GST.

Look at the positives of all these. Before demonetisation, India had four million registered MSMEs. In the past few months, their number has swelled to nearly eight million. A registered MSME unit gets all the benefits of government schemes and programmes and comes within the umbrella which ultimately helps it to flourish. Of the nearly 50 million MSME units, we want to get the maximum number registered. We are creating a databank of all MSMEs, to be segregated on the basis of micro, small and medium. We would identify and project these units, which would help them in getting good buyers for their products. So far, over 100,000 units have joined the data bank and it is growing every day.

Critics say policies of governments, including earlier ones, are to be blamed for not allowing MSMEs to grow bigger. 

It is a traditional view that benefits induce the present MSMEs to remain small, to continue availing of these. In the present scenario, with GST being implemented, there are virtues in becoming bigger and more efficient.

The finance ministry had reduced the corporate tax rate by five percentage points for MSMEs this financial year. Has there been any impact?

Definitely, a good number of MSMEs have taken benefits out of it. The exact numbers will come with a lag, due to the nature of the data collecting machinery.