Experts have proposed several measures to create a simplified tax regime for e-commerce MSMEs, including lowering the TCS rate and introducing digital B2C invoices.
Key Highlights
- Adoption of a single home state PPOB (principal place of business) model) was recommended by MSMEs.
- The recommendations also included an API-based APOB registration system by e-commerce operators for each seller’s GSTIN at warehouses.
- Cash balance should be automated and refunded within a three or five-day period, requested the MSMEs in the discussion.
A roundtable discussion was held on Friday by the MSME representative body Federation of Indian Micro and Small & Medium Enterprises (FISME), and was attended by members of Parliament from various parties, tax experts, MSME industry associations, and online sellers.
At the discussion, stakeholders of MSMEs in the country called for the adoption of a single home state PPOB (principal place of business) model in Goods and Services Tax (GST) regulations. It was argued that this would increase operational flexibility for sellers, facilitate MSMEs’ growth through e-commerce, secure state GST revenue, and promote transparent audit trails.
At the roundtable, e-commerce MSMEs focused on the worries they have surrounding GST.
They discussed the requirement to obtain PPOB registrations in each state in which they are conducting business, which leads to a need for physical offices, resulting in blocked working capital and personnel costs.
MSMEs pointed out the difficulty in updates for extra premises due to a two-four-week waiting period for Additional Place of Business (APOB) registration, causing sales losses.
It was recommended that an API-based APOB registration system by e-commerce operators for each seller’s GSTIN at warehouses should be implemented in order to cut the time required for inventory placement and to avoid the need for repeating verification for the same premises.
MSMEs recommend TCS Cut and Digital B2C Invoices
MSMEs pointed out that the necessity of physical invoices in the digital age and the 1% Tax Collected at Source (TCS) surveillance system are causing working capital inefficiencies for e-commerce vendors.
Stakeholders proposed allowing digital B2C transaction invoices to help MSMEs cut costs and reduce their carbon footprint. Additionally, they recommended lowering the TCS rate to 0.1 per cent cumulatively in order to alleviate the working capital problem for merchants and keep track of everything.
Astonishment was voiced by Anil Bhardwaj, Secretary General of FISME, concerning the issues small entrepreneurs and artisans have faced in complying with GST regulations despite Prime Minister Narendra Modi’s initiatives to channel digital and e-commerce trade in order to link those same businesses to wider markets.
Bhardwaj noted that it is necessary for businesses to receive multiple registrations in states where their merchandise is kept. Additionally, these companies must assemble a comprehensive system and wait for an extended period of time in order to add new locations.
He further mentioned that the difficulty of doing business is being hindered further by the complexity of the tax procedures, as well as by the intimidation and harassment from state tax authorities.
MSMEs have requested that the cash balance be automated and refunded within a three or five-day period after the application is submitted. This timeframe, referred to as T+ number of days, is a settlement that takes place from the transaction date plus one, two, three, or five days.
The vendors suggested that tax officials should receive comprehensive training to acquire detailed knowledge about the most recent e-commerce business model.
Rajendra Agrawal, a Member of Parliament, addressed MSMEs and other stakeholders, stressing that any matters they raise, including the challenges faced by MSME vendors, will be passed on to the relevant ministry and officials to resolve.
He underscored the importance of the MSME sector in achieving the Prime Minister’s vision of Atmanirbhar Bharat and asked them to present their case in order for him to speak up for them in Parliament and encourage the government to take their issues into account.
