Experts call for further simplification of the GST regime to help MSMEs sell online

New Delhi, 28th November 2023: India’s thriving MSME sector has presented unprecedented growth potential in the last few years, propelling the nation towards the ‘Trillion-Dollar Digital Economy’ goalpost envisioned by the government. While recent GST simplifications have nudged the industry forward, avenues of further simplification still remain, demanding renewed attention from stakeholders.

The Dialogue, a leading public policy think-tank, hosted a webinar titled “Simplification of the GST Regime: Towards a Sustainable and Inclusive Growth of MSMEs,” exploring how the right regulatory changes could simplify compliance for MSMEs and nudge the industry towards greater alignment with the government’s vision for this integral industry. The session witnessed Speakers from the Ministry of Finance, Trilegal, E&Y, Deloitte and Best Life – an e-commerce seller, allowing for a representative discussion on the way forward.

The panellists, while underscoring the efforts taken by the government and GST council towards empowering MSMEs also explored areas where simplification of certain rules would further help the online sellers to expand their businesses. They highlighted the need for simplification in the Principal Place of Business (PPoB) norms being mandated in every state. In the interest of digitisation and reduction in compliance burdens, they proposed the implementation of a single home-state PPOB registration and subsequent virtual PPOB registrations for small sellers, in line with the Parliamentary Committee on Commerce’s recommendations.

The panel, moving forward, also proposed embracing the digital invoicing of B2C transactions, aligning with the government’s broader strategy of facilitating the electronic filing of returns and implementing e-invoicing in all sectors.

Bipin Sapra, Partner and Leader, Indirect Tax Policy, E&Y, said “E-commerce is a game changer for MSMEs and the government has recognised it. They are also helping MSMEs come online as is evident from the recent steps taken by the GST council. While significant strides have been made, there is still some scope to bring reforms in terms of requirement of physical place of business in every state and digital invoicing to help MSMEs optimally use e-commerce to its full potential.”

Karan Kohli, Co-Founder, Best Life Naturals, said, “The biggest challenge we faced, the moment you decide to scale up, there is a need to set up warehouses in different states in order to fulfil the demand. Physical inspection mandates in the GST registration procedure are manageable in the home states. However, when we scaled to other states, it took us an unreasonably longer time to get registered, affecting our sales potential. This issue varies from state to state. In one state, we got our registration number in three months, and in the other, we had it within a week despite the procedures and the documentation submitted being the same. Getting APoB registration for warehouses further adds to the timeline, holding us from supplying to a demand that may fade by the time we are registered and ready to deliver, and that for a small company is huge. There is a need to address these issues and simplify the regime for at least the small companies so that we can scale our business.”

The policymaker from the finance ministry acknowledged the issues persisting in the sector and welcomed a report on the issues faced by the MSMEs in the current GST regime.

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