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MSME Sector and Goods and Services Tax (GST) May 14, 2013 New Delhi S Madhavan

MSME Sector and Goods and Services Tax (GST) May 14, 2013 New Delhi S Madhavan Co-Chairman, Task Force on GST Federation of Indian Chambers of Commerce and Industry. Current State of Play. Constitution of three Committees by the Empowered Committee

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MSME Sector and Goods and Services Tax (GST) May 14, 2013 New Delhi S Madhavan

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  1. MSME Sector • and • Goods and Services Tax (GST) • May 14, 2013 • New Delhi • S Madhavan • Co-Chairman, Task Force on GST • Federation of Indian Chambers of Commerce and Industry

  2. Current State of Play • Constitution of three Committees by the Empowered Committee • - Revenue Neutral Rates of Central GST and State GST • - Place of Supply Rules • - Dual Administrative Control • - Threshold and exemptions in GST regime • - Taxation of Inter-State Trade • - GST on imports • Draft Reports of the Committees deliberated upon by the Empowered Committee in its meeting on 10th and 11th May, 2013, in Musoorie; Reports yet to be finalized 2

  3. Issues of Specific Relevance to MSME Sector • Threshold Limit • - Rs.1.5 crores for Central Excise • - Rs.10 lakhs for Service Tax • - Different Value Limits for VAT for different States • - Likely threshold limit Rs.25 lakhs • Dual Administrative Control • - Central GST - Central Government (Excise & Customs) • - State GST - State VAT Authorities 3

  4. Implications of GST for the MSME Sector • Supply Chain Management • - Possibility of lowering cost of operations due to: • Compression of the supply chain • Disintermediation • Unfettered credits throughout the chain • - Centralization and Uniformity of Sourcing • - Traditional hub and spoke distribution model is seriously challenged • - Impact of tax payments on stock transfers • - Impact of replacement of exemptions by refund of taxes • Product pricing: • - B2C and B2B supplies • - Product affordability • - Product reach/market share 4

  5. Conclusions • Engagement with External Stakeholders • Stay actively engaged in all dimensions of the GST debate • Make representations to the Government to ensure that all issues pertaining to GST implementation are addressed • Internal Preparations • Identify areas in business models/supply chains/processes which need to be re-engineered • Identify requirements of reconfiguration of IT systems, modification in documentation, MIS and accounting • Identify training needs, both internal as well as external • Get ready for a smooth transition to the new tax regime 5

  6. Thank You 6

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