The MSME sector is one of the most significant contributors to this country’s economy. It employs a large section of the population, reaching approximately around 100 million people. MSME contributes 40% of the country’s exports, 45% of the manufacturing sector, and 69% of the employment generation in the current scenario.
With the introduction of GST, the industry’s part in revenue collection has become even more. At present, the MSME sector contributes nearly 11% to the GST. Despite having such huge potential, the MSMEs have been facing some serious problems in terms of technological disturbances, supply chain disruption, uncertain market situations, increasing competition in the domestic and global markets, etc.
Apart from these, one of the critical issues that MSMEs face today is the funds shortage. Msme Business Loan helps businesses overcome fund shortages with ease. In India, almost every financing institution offers an MSME loan.
On the other hand, GST implementation is one of the most sought-after economic reforms in the history of India, which is why it is very critical to understand how this GST regime has affected the MSME sector.
Benefits of GST for MSME
- Reduction of logistics expenses
Earlier, different states used to impose different charges at interstate toll booths for goods of another state. This made the total cost of the transportation of goods very high. Because of GST, no multiple charges are levied at different interstate toll booths. Hence, the total logistics cost for the movement of goods has reduced considerably, and the MSMEs can transport their products at a lower cost.
- One Market-One Country-One Tax
Before GST, there were different rules and regulations for the markets of different states. As a result, traders of one state faced many difficulties while shipping their goods to another state. Now GST has simplified the tax structure for interstate markets. Hence, the traders can easily access other markets and expand their business.
- Reduced tax burden
Previously, MSMEs had to maintain different tax accounts for the central and state governments. As a result, the number of documents you need to keep was also mammoth. Furthermore, businesses used to pay about 32% in taxes, including the indirect tax.
The introduction of GST has revised all of it. Since all the indirect taxes are now under one roof, the paper trail has been reduced. Also, the total taxes are limited to 18% to 22%, which is also an advantage.
- Enhanced compliance
Earlier, the MSMEs had to pay VAT if their business turnover was more than Rs 5 lakhs or Rs 10 lakhs in some states. The rules were different, and this used to create unnecessary confusion among the businessmen. Now, under GST, only one rule applies to the whole country and every state. Thus, managing a business has become simpler.
- No difference between goods and services
Earlier goods and services were considered separate entities, and different taxes were levied on both. GST has reduced the complications by eliminating the different statuses given to goods and services. Now, the MSMEs need to calculate taxes only on the final product, and this makes the whole procedure hassle-free. The instances of tax corruption have been reduced to a considerable level.
End Note
To sum up, the implementation of GST has been nothing but a boon and it has reduced the complications of the Indian taxation structure and brought a unified framework. As a result, the MSMEs have benefited enormously from this system, which helped them to scale up even further and contribute more to the country’s development. What’s more, securing a Business Loan in India has also become more accessible than ever for MSMEs.
About the Author
Amaira Sharma is finance expert and former business growth strategist who has more than 8+ years experience in the industry, now she helps others to get better financial stability and standards. She loves to write useful tips on personal finance and businesses.
