MSME refers to Micro, Small, and Medium Enterprises, which were introduced by the Government of India by the Micro, Small, and Medium Enterprises Development Act, 2006. MSME is initiated and managed under the Ministry of MSME and is an entity engaged in the production, manufacture, processing, and preservation of goods and commodities. MSME, despite being a big contributor to India’s growth story, is still lagging behind. The E-commerce wave has taken over MSME (Micro, Small, and Medium Enterprises) sector with a huge turn. However, in this transformation, the Goods and Services Tax (GST) poses several roadblocks for MSMEs. Due to Covid 19 wave, most MSME businesses turned these online. Because the physical movement was restricted, MSMEs that were integrated with e-commerce platforms had an edge over those that did not have an online presence. MSMEs were able to keep their businesses afloat thanks to online sales channels. Self-sufficiency: E-commerce can play a key role in fulfilling the visions of ‘voice for local’ and ‘Atma Nirbhar Bharat.’ Businesses are able to reach a wider audience: It allows products from the hinterlands to reach the national market, giving craftsmen and small sellers in Tier 2/3 towns the opportunity to sell online to clients outside their immediate area. The survey found that in 2020-21, online sales accounted for 27% of total sales compared to barely 12% in 2018-19. With all the growth in the business, there are challenges to face. MSMEs have challenges when it comes to integrating e-commerce platforms.
- Because firms that are integrated on e-commerce platforms are required to register for the goods and services tax (GST), they are unable to take advantage of GST benefits because e-commerce marketplaces do not benefit from the GST threshold exemption (Rs 4 million).
- In e-commerce, it is not quite practical for online sellers to have a physical place of business. It makes it more difficult for MSMEs to register in e-commerce marketplaces.
- MSMEs operating through online platforms are burdened with cumbersome and time-consuming periodical compliance needs like registration and the monthly filing of returns, which further dissuades them from registering under the GST Network.
- MSME offline sellers under ₹1.5 crores annual turnover with intra-state sales cannot continue with simplified GST compliance processes under the composite GST scheme if they wish to sell online.
Compliance for an MSME sector
- E-commerce business/ MSME GST registration is mandatory. Every e-commerce operator irrespective of their turnover is required to be compulsorily registered under the CGST Act.
- MSME Form 1 is the form for furnishing half-yearly returns with the registrar concerning the outstanding payments to the Micro and Small Enterprises.
- Section 22 – MSME Act Disclosure in Financial Statement
- Section 23 – Interest Disallowed under Income-tax Act, 1961(MAT and Normal Tax )
- Section 24(ix) of the CGST Act, 2017, states that “any person who supplies goods through an e-commerce operator, is required to compulsorily register under GST, irrespective of the turnover of such persons.