Micro and tiny industrial units with turnover of less than Rs 20 lakh, are exempted under GST. But larger SSI units that buy from them face a reverse charge, the buyers pay the tax. This could mean larger units may prefer not to buy from such unregistered businesses which could in the long term affect the segment, SSI representatives feel.
VS Narasimhan, National General Secretary, Federation of Association of Small Industries of India, said that GST is not sensitive to the status of small businesses, particularly the micro and tiny enterprises. These units need to be given time to fully digitise and go online. Also, the provision for reverse charge on dealing with unregistered units will discourage larger industries.
The Centre should consider some kind of an incentive such as the notional credit provided under Modvat where smaller units supply goods under a lower tax and the larger segment buyers take credit at higher rates.
The micro and tiny industrial units are run by entrepreneurs who have built skills over the years as employees in larger units. They then strike out on their own and are nurtured as suppliers by larger units. This could be affected unless the GST provides for their growth, he said.
A Shanmuga Velayudham, a small scale industrialist and consultant, said that in Tamil Nadu alone there are over 10 lakh micro and tiny units that are crucial to SSIs. They need to be given time to go fully online as needed under GST. The concept of notional credit has to be given at least for a couple of years as an incentive for units to buy from smaller unregistered suppliers. The SMEs generally welcome the GST but there are some issues that need to be addressed, particularly to support the micro and tiny units.
Source: The Hindu Business Line