The 32nd Goods and Services Tax (GST) Council meeting addressed most of the issues outlined by states and Union Territories (UTs) for the micro, small and medium enterprises (MSME) sector. These include a hike in the turnover threshold, introduction of a cess in Kerala to raise funds for flood relief, and extension of the composition scheme (alternative for paying tax rather than GST) to service-sector MSMEs.
However, CRISIL Research believes the impact of these decisions on the MSME sector would be low to moderate at best, considering that the GST is only a part of their woes. The bigger issues, such as lack of access to formal credit, remain as alive as ever.
A look at the key decisions taken by the GST Council:
Turnover threshold limit: Moderate impact
Over 20 lakh MSMEs will benefit from doubling of the turnover threshold limit for filing GST returns to Rs 40 lakh. Some states/UTs such as Puducherry, which had insisted on the Rs 20 lakh limit, now have an option to choose either. For hill/small states, the exemption limit has been doubled to Rs 20 lakh, with an option of moving up to Rs 40 lakh.
Service providers with a turnover of up to Rs 50 lakh can now avail the composition scheme at a rate of six per cent, compared with nil composition earlier. The services sector comprises 21 million MSMEs, or 33 per cent of India’s 63.3 million MSMEs. The existing composition limit of Rs 1 crore for manufacturers, traders and restaurant service providers has been revised to Rs 1.5 crore from April 1, 2019.
State-level benefits: Low impact
The 3.8 per cent of India’s MSMEs located in Kerala will get flood relief through a cess of up to one per cent on intra-state sale for a maximum of two years.