A Tale of Two Cities
Meerut, a bustling city on the outskirts of Delhi, is renowned as a hub for sports goods manufacturing. Here, amidst the whirring of machinery and the rhythmic hammering of skilled artisans, the impact of the Goods and Services Tax (GST) is being keenly felt.
Lokesh Kumar Sharma, a senior partner at VATS Sports, is effusive in his praise for the GST regime. He believes it has acted as a catalyst for the nation's progress, streamlining operations and simplifying the tax landscape. This sentiment is echoed by other micro, small, and medium enterprises (MSMEs) in the area, who see the 5% GST on clothes as a boon, eliminating the burden of untaxed fabric purchases.
However, a different story unfolds just a few kilometers away. Pharmaceutical distributors in Muzaffarnagar and Meerut are grappling with disrupted local trade and unexpected tax notices. Small distributors, who spoke on condition of anonymity, expressed frustration at receiving notices for minor discrepancies dating back years.
The issue of delayed payments to MSMEs also casts a shadow. Despite provisions in the Income Tax Act mandating payments within 45 days, many small businesses are struggling to collect dues. The MSME Samadhaan Portal reveals over 182,000 complaints filed by small businesses seeking over Rs 42,000 crore. State governments, central PSUs, and proprietors account for the bulk of these outstanding payments.
While some MSMEs, like Active Sports, acknowledge timely payments from the government, others like VATS Sports lament delays stretching back years. The experience of Santosh, from Quality Flavours Exports in Moradabad, further highlights the challenges faced by MSMEs. His company, a manufacturer of mint essential oils, is still awaiting payment, with the deadline extended to 90 days.
Rising raw material costs are another concern for MSMEs, particularly in the brass and iron manufacturing sector. Some manufacturers are even contemplating alternative work due to the escalating costs.
Despite these challenges, the government's initiatives to protect MSMEs in tenders and improve access to bank loans are seen as positive steps. However, concerns remain regarding the Government e-Marketplace (GeM), an online platform for procuring directly from MSMEs. While the platform has facilitated access to tenders across India, the re-auction bid process is seen as detrimental to profitability.
The contribution of MSMEs to the Indian economy cannot be overstated. In FY22, they accounted for 29.1% of the country's GDP, a significant contribution that underscores their importance. As the government continues to refine its policies and address the concerns of MSMEs, their continued growth and prosperity will be crucial to India's economic success.