MSME Sector
and
Goods and Services Tax (GST)
May 14, 2013
New Delhi
S Madhavan
Co-Chairman, Task Force on GST
Federation of Indian Chambers of Commerce and Industry
Current State of Play
• Constitution of three Committees by the Empowered Committee
- Revenue Neutral Rates of Central GST and State GST
- Place of Supply Rules
- Dual Administrative Control
- Threshold and exemptions in GST regime
- Taxation of Inter-State Trade
- GST on imports
• Draft Reports of the Committees deliberated upon by the
Empowered Committee in its meeting on 10th and 11th May,
2013, in Musoorie; Reports yet to be finalized
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Issues of Specific Relevance to MSME Sector
• Threshold Limit
- Rs.1.5 crores for Central Excise
- Rs.10 lakhs for Service Tax
- Different Value Limits for VAT for different States
- Likely threshold limit Rs.25 lakhs
• Dual Administrative Control
- Central GST - Central Government (Excise & Customs)
- State GST - State VAT Authorities
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Implications of GST for the MSME Sector
 Supply Chain Management
- Possibility of lowering cost of operations due to:
- Compression of the supply chain
- Disintermediation
- Unfettered credits throughout the chain
- Centralization and Uniformity of Sourcing
- Traditional hub and spoke distribution model is seriously challenged
- Impact of tax payments on stock transfers
- Impact of replacement of exemptions by refund of taxes
 Product pricing:
- B2C and B2B supplies
- Product affordability
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- Product reach/market share
Conclusions
Engagement with External Stakeholders
 Stay actively engaged in all dimensions of the GST debate
 Make representations to the Government to ensure that all
issues pertaining to GST implementation are addressed
Internal Preparations
 Identify areas in business models/supply chains/processes
which need to be re-engineered
 Identify requirements of reconfiguration of IT systems,
modification in documentation, MIS and accounting
 Identify training needs, both internal as well as external
 Get ready for a smooth transition to the new tax regime
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Thank You
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