The Impact of GST on MSMEs and Their Filing Requirements

Posted In | Finance | Accounting Software | India Accounting Tax

Micro, Small and Medium Enterprises (MSMEs) form the backbone of India's economy, providing employment to millions of people and contributing significantly to the country's GDP. The introduction of Goods and Services Tax (GST) in 2017 has had a profound impact on these enterprises.
 

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Impact of GST on MSMEs

The amalgamation of multiple taxes into a single, unified system aimed to simplify the tax structure, is a welcome move for MSMEs. GST has eliminated the cascading effect of taxes, thereby reducing the overall cost of goods and services and making products cheaper for the consumer.

However, the implementation of GST also brought certain challenges for MSMEs. The compliance procedures under the new tax regime are complex and time-consuming, which is a significant burden for small businesses that lack the necessary resources. Moreover, the frequent changes in GST rates and rules have created an environment of uncertainty, making it difficult for these enterprises to plan their businesses effectively.
 

Filing Requirements under GST for MSMEs

The GST Act mandates that every registered person must file monthly, quarterly, and annual returns. These include GSTR-3B (monthly summary return), GSTR-1 (quarterly return for outward supplies), and GSTR-9 (annual return). MSMEs with an annual turnover of up to Rs. 1.5 crores can opt for the Composition Scheme under GST. Under this scheme, they are required to file only one quarterly return (GSTR-4) and an annual return (GSTR-9A). However, they cannot avail input tax credit and cannot make interstate supplies.

The GST portal provides a comprehensive guide on how to file these returns. But given the complexities involved, it is advisable for MSMEs to engage a tax consultant or use GST software to ensure accurate and timely filing of returns. Failing to do so can result in heavy penalties.

 

While GST has its advantages and disadvantages for MSMEs, it is undeniable that it has brought about a paradigm shift in India's indirect tax system. To reap the benefits of GST, MSMEs must understand the intricacies of the new tax regime and comply with the filing requirements diligently. With the government taking steps to simplify the GST procedures and provide relief to small businesses, the future of MSMEs under GST looks promising.