As the government prepares to roll out GST reforms by Diwali, micro, small and medium enterprises (MSMEs) are hoping for simpler registration, compliance, and refund processes. Business owners say that despite nearly eight years of GST, bureaucratic hurdles — particularly at the state level — continue to weigh them down.
According to the President of the SME Forum, the churn within the GST system highlights compliance fatigue. “Nearly 1.75 lakh GST registration revocations and around 1.5 lakh cancellations occur every single month, reflecting the procedural fatigue and compliance difficulties faced by businesses,” he said.
A West Bengal-based MSME owner, requesting anonymity, alleged that due to the lack of process automation, they are often harassed by state officials for bribes. Several entrepreneurs echoed similar concerns, pointing out that irrelevant show-cause notices (SCNs) are frequently issued, only to be dropped later.
An industry expert, recalled once receiving a demand notice of ₹95 lakh with an additional ₹1.15 crore in interest for July 2017 to March 2018. “In most cases, the notices are dropped. There should be mandatory reporting of how many show-cause notices actually stand the legal test,” Kedia said. He added that, often, even after satisfactory explanations, state officials proceed with tax impositions.
ITC conundrum
Input tax credit (ITC) allows businesses to claim reimbursement for taxes paid on purchases. However, under the current system, businesses cannot claim ITC on items taxed at 5% because of the inverted duty structure. With the government considering moving a significant share of goods from the 12% slab to 5%, industry representatives have urged that ITC be extended.
“The input credit system must remain intact; otherwise, for regular FMCG products (likely to fall under the 5% slab), the retail market will shift entirely to big players like Amazon and Reliance who buy directly from manufacturers. Local stores — which usually buy from distributors — will be severely hit,” another industry expert said.
Compliance burden
Currently, dealers must file GSTR-1 by the 11th of every month, while GSTR-3B — a non-revisable return — is due by the 20th. Late filing attracts penalties. Many MSMEs want this gap extended to ease compliance pressures. “We would like GST to be simpler, like income tax. Laws are very subjective and, overall, GST remains a complex taxation system,” another industry expert said.
