The Goods and Services Tax (GST) is levied the moment an enterprise raises an invoice. This rule strikes most of the 13,000 plus micro, small and medium enterprises (MSMEs) in Visakhapatnam. The GST has to be paid once the invoice is raised, regardless of them receiving the payments on the orders placed by customers.
The MSMEs in the city of Vizag are affected by the economic slowdown, which is prevalent for about a year now, and their major clients such as Hindustan Shipyard Ltd, Visakhapatnam Steel Plant, Heavy Plate and Vessels Plant, and HPCL Visakh Refinery are implementing several cost-cutting measures to add the woes of MSMEs.
The number of orders being placed has gone down considerably. The major factories and industries are delaying payments to the vendors. This has put MSMEs in a spot of bother as they need to settle GST without receiving any payments from the already delivered orders.
Sometimes the payments are delayed by several months after the MSMEs have delivered the orders. Despite payments not being cleared by the clients, the vendors are to pay GST at 18% while the import credit is refunded at a later stage. However, the MSMEs are levied with penalties for each day of delay in filing GST.
The MSMEs are demanding for a waiver on the preclosure charges on bank loans. A preclosure penalty at 4% is being imposed on foreclosing vehicle and industrial loans. Also, interest at 6% is given if the income tax refund is delayed. However, if the MSMEs delay paying taxes, then interest would be imposed in the range of 12% to 18%.
The rules of capital gains are little too harsh on MSMEs. Enterprises struggling to clear debts will sell their properties to mobilise funds. But on doing so, they attract capital gains tax. The MSMEs are expecting the capital gains to be considered by factoring the debt which an entrepreneur intends to clear by the proceeds of the sale of the property.
The MSMEs entrepreneurs had a meeting with Pratap Chandra Sarangi, the MSME Union Minister of State when he recently visited Visakhapatnam. The minister assured MSMEs that their problems would be addressed. The revenues and job opportunities created by the MSME sector is very significant for the government.
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Engineer by qualification, financial writer by choice. I am always open to learning new things.