Lok Sabha polls | For MSMEs, GST is a concern that parties must address this election season

GST remains a contentious issue for MSMEs in India, with demands for rate reduction ahead of Lok Sabha elections.

More than six years since the Narendra Modi regime rolled out the Goods and Services Tax (GST), the issue remains a bone of contention in several MSME (micro, small and medium enterprises) clusters in different parts of the country, including in Tamil Nadu. Reduction in GST rates is a core demand for representatives of MSMEs as the country gears up for the Lok Sabha election.

According to government data, there are seven crore MSMEs across sectors in the country and an estimated 12 crore people are dependent on it. “If these units do well, all those who depend on it will benefit,” Sudhir Jha, national convenor, All India Manufacturers Organisation and vice president of the MSME Development Forum, said.

However, over the years, GST slabs have paralysed many of these units. “MSMEs do not have the resources or understanding of GST mainly because most of these units are run by a single person,” he said. Such small units are technically exempted from GST because of low turnover. But they are suppliers to a larger, GST-registered industry and hence are expected to provide at least minimum documentation.

Those micro or small-scale units that are unable to do so are losing business, Mr. Jha said.

In the MSME clusters in Coimbatore in Tamil Nadu and Ludhiana in Punjab, industrial associations have submitted their demands related to GST to candidates contesting the elections in the respective constituencies.

The main demand in Coimbatore is the reduction of GST on labour charges (job work) undertaken by the micro and small-scale units in the engineering sector.

“The rate was initially 18% and after a lot of representations, it was reduced to 12%. It should be either 5% or nil,” R. Ramamurthy, former president of the Coimbatore District Small Industries Association, said.