Everything You Need To Know About MSME GST

The backbone of the Indian economy is MSMEs.

MSMEs are unquestionably the backbone of the Indian economy, making it crucial to support
them in running smoothly. Its importance and influence on the Indian economy are frequently

Given the number of people working in small businesses and the potential for employment, the
government supports them in their efforts and works to foster an environment that allows for
their unrestricted operation through a variety of measures.

How are MSME and GST beneficial for each other?

Higher threshold restrictions for new businesses

Businesses with an average yearly sales amount are currently required to register and pay VAT
(rs. 5 lakh in some states and rs. 10 lakh in others). For many businesses, this cost is eliminated
because a business is exempt from registration and payment under the GST if its annual
turnover is less than Rs. 20 lakh (rs.10 lakh in north eastern states). Under the composition
proposal, enterprises with revenues between 20 and 50 lakh rupees will also pay gst at a
reduced rate. Starting businesses and other small businesses should benefit from being exempt
from tax duties. Prior to this change, manufacturers with annual sales of Rs 1.5 crore or less
were exempt from the excise duty rules.

Growth that is improved

Due to numerous taxes, it was difficult for msme owners to expand their businesses in the past.
They generally opt to run their businesses without having access to other markets due to the
complex tax structures in other states. The environment has drastically changed since then.

Increased market growth for msmes

In the existing system, global corporations purchase items similar to msmes to reduce
expenses. Because they are ultimately liable for paying the interstate sales tax, msmes have
fewer customers within a state as a result. After the implementation of GST for MSME, this will
become useless. No matter where the buyer and seller are based, the tax credit will transfer,
enabling the msme sector to expand and cross international borders.

Acquisition of capital goods

Input tax credits for capital items are only available in full in the year of purchase, with the
remaining 50% being available later. Under the GST regime, the entire input tax credit can be
used in the same year as the purchase. The “made in India” campaign will benefit from this.

Lower logistics costs

The current tax structure has caused a lot of problems for the transportation sector. Due to the
lengthy lines at checkpoints and interstate entrance points, which increased labour and fuel
costs, many vehicles have been idle for a considerable amount of time. The difficulty
experienced by enterprises exporting goods to other states in completing paperwork and paying
entrance taxes at the interstate borders has caused a further delay in the delivery of goods. The
current central sales tax (cst) on interstate sales would be replaced under GST by an
amalgamated tax known as igst, made up of cgst and sgst and levied by the central
government. Under the gst system, state lines will be less important, which will cut down on both
the cost and delay of transportation. This is due to the discontinuation of border and checkpoint

Combined market

The reduction in the number of taxes levied by the federal and state governments as a result of
the reform will make it easier to move goods between states and reduce the cost of doing


MSMEs, which account for between 29 and 30 percent of India’s GDP, are the foundation of the
Indian economy. The Indian government consistently supports these businesses and provides
them with several benefits in a variety of sectors to enable them to grow their operations without
difficulty. The MSMEs were not let down by GST, one of India’s most important tax reforms.
Along with reducing tax costs, the GST’s streamlined design has been crucial to the expansion
of MSMEs.