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Delayed GST: major cause of worry for MSMEs

IT Biz Focus,

With the ongoing pre-budget phase of Union Budget 2012-13, the most fertile minds of Indian Micro, Small and Medium Enterprises (MSMEs) are already discussing desired outcomes for next fiscal and bringing forth their recommendations.

Underlining his recommendations for the Budget, Dinesh Agarwal, Founder and CEO, IndiaMART.com, shares, “The MSME sector, having contributed tremendously to the Indian economy, has always lacked requisite support from all quarters. The time is ripe to support and equip them to establish their strong foothold in domestic and international markets.

Many believe that credit crunch is the biggest worry for MSMEs. However, they overlook the fact that higher and multiple taxes, and compliance with multiple departments are the key challenges for them due to their small set ups and thin management. We request the honorable Finance Minister to simplify and unify taxation for MSMEs in this year’s Union Budget. Also, consolidation of multiple departments will help address issue of compliance. It will help MSMEs rise above pertinent issues of conforming to several norms and lengthy, time-consuming paper-work.

Agarwal added that the delay in GST implementation has marred hopes of many MSMEs. They fear that now it may get rolled out in a much complicated form, not in its original shape. To tackle this, a pragmatic approach towards faster implementation of Goods and Services Tax (GST) is required.

Makrand Appalwar, CMD, Emmbi Polyarns Limited, Mumbai, also finds faster GST implementation as the most important requirement today and urges government to kick start it at the earliest.

“Essential infrastructural necessities such as land, power, connectivity, et al may seem to be very basic, but in reality they are extremely crucial for MSMEs’ growth. For this, more industrial zones with reasonable land prices must be announced while continuous power supply must be made available to factories, manufacturing set ups of MSMEs,” recommends Agarwal.

Dinesh Kotian, Partner, Ace Heat Tech, says, “Every enterprise aims to grow bigger and so do SMEs. Expensive industrial land comes as a major hindrance along with high interest rates in company’s expansion plans. Steps should be taken to offer subsidized land and interest rates to SMEs. Also, a substantial number of SMEs have their setups in outskirts of cities. Unfortunately, basic infrastructural requirements like road connectivity, power supply, etc. are not in good condition in such areas. Government should pay attention here as well.” Adding to this, Appalwar notes, “Development of port infrastructure is very vital as the efficiency of exports depends majorly on it. We have a single port operational here in Mumbai and if any fault happens at the back end, entire operations suffer.”

On the other hand, Agarwal praises government’s efforts for bringing effective policies that have helped build ‘communication infrastructure’ in country in the last 15years. He states, “What is now required is better and low-cost broadband services across the country, especially in tier-II and tier-III cities. This would allow MSMEs to utilize enormous business opportunities present online.

Strong steps are required from our government to free MSMEs from the credit crunch worry too. Execution of priority sector lending policies for MSMEs demands rigorous approach. Also, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) needs to widen its ambit and cover more MSMEs which can avail collateral free financing. This will help entrepreneurs to overcome financial hurdles while setting up their projects or scaling up.

We also look forward to extension of facilities (such as Zero Duty Export Promotion Capital Goods (EPCG), Status Holder Incentives, etc.) for exporters under Foreign Trade Policy till March, 2014 instead of the current time line of March 31, 2012. This will encourage MSMEs to achieve higher export figures.

“We hope to see a budget that addresses key requirements of MSMEs in terms of basic infrastructure, simplification of taxation, easy access to funds, among others,” concludes Agarwal.

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